Buyers often think they have to pick between DPA and seller credits. The reality is they're two different tools that often work together. This page explains what each one actually covers, when they stack, and how to negotiate both at maximum value.
At-a-glance guide for which option fits which buyer scenario.
Pros: Covers down payment AND closing costs in many cases, sometimes forgivable (free money long-term), doesn't depend on seller cooperation, often layered with other DPA programs
Cons: Income limits exclude many buyers, program funding can run out, longer close timeline (program approval), some programs higher rate on first mortgage
Pros: No income test, no program approval needed, faster close (no third-party program), seller often willing to credit instead of dropping price
Cons: Only covers closing costs and prepaids (NOT down payment), depends on seller agreeing, market-dependent (hot market = no credits), capped by loan type (FHA 6%, VA 4%, Conv varies)
For most first-time buyers I model both. DPA when income qualifies; seller credits as the negotiating lever in soft markets. Stack both when you can - DPA covers the down, seller credits cover the closing. That combo often gets buyers to under $5,000 cash-to-close on a $500K home.
- Ken Clark Jr., Certified Mortgage Advisor, NMLS #225375
Yes, and it's the most powerful first-time buyer move. DPA covers the down payment, seller credits cover the closing costs. Together they often produce sub-$5K cash-to-close on a $500K home.
FHA: up to 6% of purchase price. VA: up to 4% (plus VA-specific concessions). Conventional: varies by occupancy and down payment - typically 3% (under 10% down) up to 9% (25%+ down). Investment property: 2%.
No. Seller credits can only be applied to closing costs, prepaids (taxes/insurance), and interest rate buydowns. They cannot be applied to the down payment under any loan program.
Generally no. DPA programs target primary-residence first-time buyers. Investors use seller credits, conventional terms, or DSCR financing instead.
Build it into the offer. Common structure: offer at or slightly above asking, request 3% seller credit toward closing. The seller sees the same net but you get cash-flow help. In slow markets, ask for 5-6% credit.
20 minutes on the phone, no pressure. Walk away with a clear picture of your real options.
Disclaimer: This page is for educational purposes only and is not a commitment to lend or guarantee of approval. Loan programs, rates, terms, eligibility, and program availability are subject to change and depend on credit, income, assets, property, occupancy, location, and underwriting. Not all borrowers will qualify. Individual results vary. Equal Housing Opportunity. PRMG Mortgage. NMLS #75243. Ken Clark Jr. NMLS #225375. Licensed in 49 states, excluding New York.