When you are under contract in Kirkwood, Maplewood, or Chesterfield, deciding whether to take a seller credit or price cut in St. Louis can significantly impact your bottom line. The seller will give you $8,000. The agent asks whether you want that as a closing-cost credit or as a price reduction. Those are not two spellings of the same gift. They change cash to close, loan-to-value, mortgage insurance, and whether the conventional loan even fits Fannie Mae concession caps.
Sean Zalmanoff at Better Rate Mortgage walks St. Louis buyers through that choice before the amendment is signed. This is education for shoppers and agents. It is not a rate, not an APR, and not a commitment to lend. Fannie Mae, FHA, VA, and wholesale overlays change. Ask which program you are actually using on this purchase.
What a seller credit actually pays
A seller credit (a financing concession) is money from the seller, builder, or another interested party that is applied to costs the buyer would otherwise write a check for at closing: origination, title, prepaid taxes and insurance, and similar items on the Closing Disclosure.
Fannie Mae Selling Guide B3-4.1-02 (Interested Party Contributions) is the conventional rulebook Sean uses for this conversation. Financing concessions can go toward borrower closing costs, including prepaids, and toward HOA assessments after closing for no more than 12 months. They cannot be used to make the down payment, to meet reserve requirements, or to meet the minimum cash the borrower has to bring.
The credit also cannot be larger than the buyer’s actual closing costs. Extra dollars above those costs are treated as a sales concession. Sales concessions get deducted from the sales price, and the loan-to-value is recalculated on the lower of that reduced price or the appraised value. Furniture, moving money, and cash outside closing belong in that sales-concession bucket. Undisclosed side deals are not eligible for sale to Fannie Mae.
The conventional cap is a percent of value, not a vibe
On a principal residence or second home, Fannie Mae’s maximum financing concessions (as of the October 2026 Selling Guide table) are:
- 3 percent when LTV/CLTV is greater than 90 percent
- 6 percent when LTV/CLTV is 75.01 percent to 90 percent
- 9 percent when LTV/CLTV is 75 percent or less
Investment property is 2 percent at every CLTV. The percent is calculated on the lower of sales price or appraised value, not on the loan amount. Typical fees a seller already pays by local custom are not counted against that cap.
A St. Louis buyer putting 5 percent down on a $400,000 house is in the greater-than-90-percent band. The conventional financing-concession ceiling is 3 percent of value, not “whatever the seller offered in the Facebook group.” If the credit is written larger than the cap, the excess is a sales concession and the LTV math moves. That can change mortgage insurance, pricing, and whether the application still qualifies.
FHA and VA purchases use different concession rules. Do not paste the Fannie table onto an FHA contract. Tell Sean the program on day one so the amendment matches the investor.
What a price cut does instead
A price reduction lowers the contract price. The loan amount can drop with it. Cash to close can drop because you are financing less. Mortgage insurance on a conventional loan can drop or disappear if the new LTV crosses a band. Property taxes in later years follow the recorded price in a way a closing-cost credit does not.
The tradeoff is cash at the table. A credit can leave more of your savings in the bank because the seller is covering fees you would have paid. A price cut can leave you writing a larger check for those same fees while the mortgage is smaller. Neither path is automatically “better.” It depends on how thin cash to close is, whether PMI is in play, and whether the credit would blow the IPC cap.
Appraisal still has to support the contract. A credit that is really a disguised price cut, or a price that only works because of unreported giveaways, shows up when the appraiser and the underwriter compare the contract, the Loan Estimate, and the Closing Disclosure. Better Rate Mortgage would rather rewrite the amendment than fight a condition two days before closing.
Choosing a Seller Credit or Price Cut in St. Louis
Ask three questions before anyone drafts the change:
- Do I need the dollars as cash at closing, or do I need a smaller loan?
- Will this credit fit the concession cap for my down payment and occupancy?
- Will the appraisal and the investor treat leftover credit as a sales concession that cuts the price anyway?
If cash to close is the blocker, a credit that fits the cap and matches real fees is often the cleaner tool. If you are sitting on plenty of cash and the monthly payment or PMI is the pain, a price cut can be the cleaner tool. If the seller’s number is bigger than allowed financing concessions, write the excess as a price reduction instead of hoping the underwriter ignores it.
Temporary rate buydowns funded by the seller count toward the IPC calculation on the Fannie path. A 2-1 buydown is not “free marketing.” The subsidy cost has to fit the same concession ceiling. Payment abatements (someone covering your mortgage after closing) are not eligible for sale to Fannie Mae at all.
What to bring Sean this week
Send the current contract, the proposed amendment, the Loan Estimate, and a simple list of fees you still expect to pay. Say whether this is a primary home, a second home, or an investment. Say the down payment you can actually wire, not the one that looked good on a napkin.
Sean Zalmanoff, NMLS 239823, will help you evaluate whether a seller credit or price cut in St. Louis works best for your specific mortgage scenario. Start at betterratemortgage.com. Do this before the inspection deadline, not the night before you wire.
Better Rate Mortgage, Company NMLS 2401335. Licensed where Sean originates. Educational only. Equal Housing Lender.
FAQ
Can the seller just “cover all my closing costs” on a conventional St. Louis purchase?
Only up to the Fannie Mae financing-concession cap for your LTV band, and only up to your actual buyer costs. More than that is treated as a sales concession and comes off the price for LTV.
Does a seller credit help me with the down payment?
No, on the Fannie Mae IPC rules. Concessions cannot fund the down payment, reserves, or the minimum borrower contribution.
Is a price cut always better because the loan is smaller?
Not if you then cannot fund title, prepaid, and origination out of pocket. Run both versions of cash to close and payment before you pick.
Do FHA and VA use the same 3 / 6 / 9 percent table?
No. That table is Fannie Mae conventional. Ask which program you are using before you copy a percentage into the contract.
What if we already signed a credit that is too large?
Bring the amendment to Better Rate Mortgage quickly. The usual fix is to recast the excess as a price reduction or to cut the credit to real costs plus the allowed cap, then re-disclose.
