How does Armando Novelo calculate seller credits for a conventional loan?

Armando Novelo calculates conventional seller-credit limits before the offer is written because Fannie Mae generally allows up to 3 percent when a primary-residence or second-home buyer finances more than 90 percent of the property's value, up to 6 percent when the loan-to-value ratio is 75.01 to 90 percent, and up to 9 percent when the loan-to-value ratio is 75 percent or less, while investment properties are generally limited to 2 percent.

How does Armando Novelo handle seller credits on a VA loan?

Armando Novelo separates normal allowable VA closing costs from seller concessions because the VA does not place the 4 percent concession cap on normal allowable closing costs, while certain concessions such as paying the VA funding fee, prepaid taxes and insurance, qualifying interest rate buydowns, or buyer debts are subject to the 4 percent limit based on the property's reasonable value.

What happens if a buyer negotiates more seller credit than the loan allows them to use?

Armando Novelo structures seller credits around the buyer's actual allowable costs because unused seller credits generally cannot simply be taken by the buyer as cash at closing.

The Homebuyer’s Corner

Can a Seller Pay My Closing Costs With an FHA, VA, or Conventional Loan?

Q: How does Armando Novelo structure seller credits for an FHA loan?

Armando Novelo structures FHA seller credits within the program's allowance of up to 6 percent of the sales price toward allowable closing costs, prepaid expenses, discount points, and certain other permitted costs.

Written by Armando Novelo, NMLS 237243, a mortgage loan officer in West Covina with over 20 years of experience helping Southern California buyers.

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Yes, a seller can pay some or all of your closing costs when you are buying a home in California. How much they are allowed to pay depends on the type of mortgage you are using, how much you are putting down, and how much your actual closing costs add up to. Armando Novelo structures seller credits for California buyers before the offer is ever written, because getting this right at the start keeps more money in your pocket at closing.

When Armando looks at a purchase, he is not only looking at the price. He is calculating how much seller credit your loan allows, how much of that credit you can actually use, and where it will do the most good: whether that is covering closing costs, prepaying taxes and insurance into escrow, or buying down your interest rate.

How Much Can a Seller Pay With an FHA Loan

With an FHA loan, the seller and other interested parties can contribute up to 6 percent of the sales price toward allowable closing costs, prepaid expenses, discount points, and certain other costs. That makes FHA a useful option for buyers who have enough for the down payment but want to preserve cash rather than spending it all at closing.

Armando Novelo looks at seller credits as a negotiating tool separate from price. Instead of negotiating only on what you pay for the house, Armando evaluates whether a seller credit structured into the offer would help you more than a lower purchase price, particularly when the difference in monthly payment between two price points is small but the cash savings at closing is significant.

One thing buyers do not realize until they are in it is that unused seller credits cannot be taken as cash. Armando structures the credit around costs you are actually permitted to have paid under FHA guidelines, so the credit is fully usable and nothing is left on the table.

How Much Can a Seller Pay With a Conventional Loan

With a conventional loan, the maximum seller contribution for a primary residence is tied directly to how much you are putting down. If you are putting down less than 10 percent, the limit is 3 percent of the lower of the sales price or appraised value. With 10 to 24.99 percent down, the limit rises to 6 percent. With 25 percent or more down, it can reach 9 percent. For an investment property, the conventional limit is 2 percent regardless of down payment.

Armando Novelo looks at these tiers before the offer is written because your down payment amount can completely change how much seller credit the loan allows. A buyer putting 9 percent down is capped at 3 percent in seller credits. That same buyer at 10 percent down jumps to 6 percent, which is a meaningful difference on a San Gabriel Valley purchase price. Armando runs those numbers in advance so the offer is structured around what the loan will actually allow.

The mistake Armando warns against is negotiating a large seller credit without first confirming whether your loan type and down payment allow you to use it. More credit is not automatically better if the program caps it below what you negotiated. Armando covered how conventional and FHA loans compare more broadly in this article, including how their cost structures differ at various down payment amounts.

How Much Can a Seller Pay With a VA Loan

VA loans work differently than most buyers and even some agents expect, and this is where Armando Novelo is careful to explain the full picture rather than the simplified version. Sellers can pay all of the buyer's normal allowable closing costs, including title, appraisal, recording fees, and lender fees, without those costs counting toward any cap at all.

The VA 4 percent concession limit is separate and applies only to extras: items like prepaid property taxes and homeowners insurance, the VA funding fee, seller-funded interest rate buydowns, or paying off a buyer's debts. The 4 percent is calculated on the VA reasonable value from the appraisal, not the purchase price.

That distinction matters significantly. Telling a veteran that the seller can only contribute 4 percent is incomplete and can cause real money to be left on the table. Armando Novelo maps out exactly what falls under allowable closing costs versus what counts as a concession before the offer is written, so the veteran's full benefit is used correctly. Armando covered how VA loans work in California in more detail in this article, including how funding fee exemptions affect what needs to be covered at closing.

Should You Ask the Seller to Pay Your Closing Costs

Whether to ask for a seller credit depends on your cash position, your loan type, your down payment, and what the market will support. Armando Novelo works through that calculation with buyers before any offer goes in.

I worked with a first-time buyer in Covina who had enough saved for her FHA down payment but was nervous about how thin her reserves would be after closing costs. Rather than asking her to save more or lower her target price, Armando structured an offer that included a seller credit covering her closing costs and prepaids. The seller accepted. She closed with her full 3.5 percent down and enough left in savings to cover her first few months of mortgage payments comfortably. The seller credit was built into the offer from the start, not added as an afterthought.

Seller credits can potentially cover standard closing costs, prepaid taxes and insurance, and in some cases discount points to reduce your interest rate permanently. The key is knowing what your loan allows before you write the offer, not after. Armando Novelo runs those numbers as part of every pre-approval conversation so buyers go into offers with a clear picture of what is possible.

Armando Novelo, NMLS 237243, is a mortgage loan officer at Super Mortgage Bros, powered by Golden Empire Mortgage. He has been helping Southern California buyers and homeowners since 2002. His office is located in West Covina, CA.

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Article Published: September 24, 2026

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Armando Novelo

NMLS 237243

Super Mortgage Bros

1900 W. Garvey Ave S. #100

West Covina, CA 91790

Phone: (626) 200-1838

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