Where does the credit go in a Texas offer?

For a resale purchase in Frisco, McKinney, Plano, Prosper, Allen or Celina, start with the contract and your lender’s estimate. I encourage Frisco buyers to model the true monthly payment with a lender, including property taxes and insurance, which buyers can underestimate. In Prosper and Celina, she notes that new-construction builders have offered price cuts and rate buydowns; compare those terms with a resale offer and the available credit. In the TREC One to Four Family Residential Contract, Paragraph 12A(1)(b) provides a dollar blank for the seller’s payment toward buyer expenses, excluding brokerage compensation and contributions under Paragraph 12B (TREC, resale contract).

Paragraph 12B separately addresses a seller contribution toward compensation the buyer owes the buyer’s broker. That compensation is negotiable. Keep these entries separate when comparing an offer and reviewing how the lender treats each payment. A signed contract records the agreement; it does not approve the loan or establish that every expense is eligible.

I see my role as protecting a client’s bottom line and helping them get to the finish line. The same form lists appraisal and loan charges, prepaid insurance, tax and insurance reserve deposits, title policy and other items among buyer expenses. Under Paragraph 12C, if a government loan rule prohibits the buyer from paying a charge, the credit is applied first to those prohibited expenses, then to other buyer expenses, excluding brokerage compensation (TREC, resale contract).

Use the lowest of four limits

The amount on the contract is a starting point. Before relying on it, compare four limits: the amount the seller agreed to pay, the loan program’s applicable limit, the buyer’s actual eligible costs, and the amount approved for the particular file by the lender and settlement team. The usable credit is constrained by the lowest applicable amount.

Buying a house happens one step at a time. Ask your lender for an itemized estimate, including prepaid costs and any points or buydown you want to consider. A seller should review the requested credit with the price and other offer terms to understand the potential effect on proceeds. For an illustration, a $400,000 FHA purchase has a 6% program cap of $24,000. This illustrates the program limit before applying the other limits above (HUD, Handbook 4000.1).

What can the credit pay?

Eligible charges can include loan origination and appraisal fees, title and escrow charges, and certain prepaid insurance and tax items. Eligibility depends on the program and the actual transaction. The contract’s list is a place to start, while your lender determines which charges can be funded in your loan (TREC, resale contract).

Discount points and rate buydowns need special attention. FHA permits eligible discount points and includes interested-party temporary and permanent buydowns in its contribution calculation. Fannie Mae also counts interested-party buydowns. Compare the cost and resulting payment, including the payment after any temporary buydown ends (HUD, Handbook 4000.1, revised August 12, 2026; Fannie Mae, Selling Guide, checked November 11, 2026).

Repairs are a separate negotiation: the seller performing work is different from a credit applied to closing expenses. Document any proposed repair arrangement in a way the lender accepts. A comparison of repairs and seller credit after inspection can help frame that decision.

A lender credit is also different from a seller credit. Fannie Mae excludes a lender credit from premium pricing from its interested-party contribution limit. Compare the associated loan terms before choosing either credit (Fannie Mae, Selling Guide). For FHA treatment, use the loan limits below (HUD, Handbook 4000.1).

Seller credit limits by loan type: FHA, VA, USDA and conventional

The following primary-source rules were checked November 11, 2026. They describe different categories and calculation bases, so the percentages are not interchangeable. Ask your lender how each payment is classified.

Conventional: Fannie Mae and Freddie Mac

For a principal residence or second home, Fannie Mae permits financing concessions of 3% when loan-to-value or combined loan-to-value exceeds 90%, 6% from 75.01% through 90%, and 9% at 75% or less. Investment property is limited to 2%. Fannie calculates the percentage using the lower of the sales price or appraised value (Fannie Mae, B3-4.1-02, dated May 7, 2025, in the guide published November 4, 2026).

Freddie Mac’s Guide also states 3%, 6% and 9% tiers for a primary residence or second home, based on LTV or TLTV, and 2% for investment property. Its percentages use value as defined in its guide. The tiers are based on LTV or TLTV (Freddie Mac, section 5501.6).

FHA

Interested parties may contribute up to 6% of the sales price toward permitted costs, including origination fees, prepaids and discount points. Interested-party buydowns and payment of the upfront mortgage insurance premium count in that limit. The contribution cannot fund the borrower’s minimum required investment (HUD, Handbook 4000.1, revised August 12, 2026).

VA

VA says it does not limit credits for a loan’s closing costs, but limits its defined seller concessions to 4% of the home’s reasonable value shown on the Notice of Value. Examples include credits for the VA funding fee, debt payoff and prepayment of the buyer’s hazard insurance. A seller-funded temporary buydown is a concession under that limit. The classification of each item, including points, matters (VA, closing costs, updated October 5, 2026; temporary buydowns).

USDA Guaranteed

Under the USDA rule effective November 9, 2026, an interested party generally cannot contribute more than 6% of the sales price toward the listed financing costs, closing costs, escrow accounts and other items, unless the agency provides otherwise. Real estate commission fees are excluded from that 6% limit (USDA, final rule, effective November 9, 2026).

Ask your lender:

• Which limit and calculation base apply to my loan and occupancy?
• Which proposed costs and buydowns count, and which are eligible for the credit?
• How much credit can I use after applying the four limits above?

Seller credit or a price reduction?

A seller credit can reduce eligible cash due at closing. A price reduction changes the purchase price, which can affect the loan calculation and payment. If cash to close is the constraint, consider the credit; if the monthly payment is the priority, consider the lower price. A lower price does not automatically solve a cash-to-close shortfall, and a credit does not automatically produce the lowest payment. For an illustration, compare a $400,000 offer with a $12,000 credit against a $388,000 offer without that credit. The first can cover up to $12,000 in eligible costs, subject to the applicable limits; the second reduces the price by $12,000 and can reduce the loan amount and payment. Ask the lender to calculate the cash to close, loan amount and monthly payment for both options using the same assumptions. The seller should also compare net proceeds after the credit and other transaction terms.

Request side-by-side estimates from your lender using the same assumptions. Compare cash to close, loan amount, rate, monthly payment and any buydown cost. Consider the seller’s likely net and whether the seller accepts the terms. If the offer price changes to accommodate a credit, the appraisal and underwriting can affect the result. In a competitive situation, weigh the credit request alongside the price and other terms; when a seller has fewer offers, there may be more room to negotiate. Review the loan limits when comparing the options (Fannie Mae, Selling Guide). For another comparison, consider closing-cost concessions versus a rate buydown.

What if the credit is too large?

Do not count on receiving the unused portion as extra cash. USDA’s rule allows no cash back beyond out-of-pocket costs (USDA, final rule). With Fannie Mae, financing concessions cannot exceed the buyer’s closing costs; excess contributions can be treated as sales concessions, deducted from the price and cause the loan-to-value calculation to be revisited. FHA likewise treats contributions above actual costs or its limit as an inducement to purchase, with a price reduction for loan-to-value purposes (Fannie Mae, Selling Guide; HUD, Handbook 4000.1).

Tell your agent and lender as soon as the estimate suggests excess credit. The parties may discuss an amendment or another eligible use, subject to agreement and lender approval. Raise excess credit as soon as it appears on the estimate.

How to request and verify the credit

1. Ask your lender for a current estimate of eligible charges and the program limit for your specific loan, occupancy and intended use of the credit.
2. Discuss the offer with your agent. Put the negotiated buyer-expense amount in the appropriate contract blank and address any buyer-broker compensation separately. Send the proposed terms to your lender for review.
3. Compare your Loan Estimate and subsequent lender worksheet with the agreed amount. Ask what is included, what may change and whether any points or buydown are approved.
4. Check the Closing Disclosure against the contract and latest estimate. The CFPB says the seller credit appears on page 3 and specific seller-paid costs may appear on page 2. The creditor must ensure you receive the disclosure no later than three business days before consummation (CFPB, Closing Disclosure explainer).

Raise a mismatch with the lender and settlement agent promptly. Ask them to explain the revised cash to close and any change in how the seller’s contribution is applied. Keep the signed agreement and amendments available. (CFPB, Closing Disclosure explainer).