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Seller credits can help pay permitted discount points, subject to the loan’s contribution limits, actual eligible costs and underwriting. The first calculation I check is the denominator: points are measured against the loan amount, while a contribution limit may use the property’s price or value. Treating those percentages as interchangeable can leave a funding gap.
The question in the file
A purchase discussion with 10% down considered pricing that cost 7.117 points for a desired rate. The question was how to divide that cost between buyer funds and a seller credit while still covering other closing expenses.
That historical pricing is not an available offer. There is no current interest rate attached to this article, and paying that number of points is not a recommendation. The lender would need to confirm current pricing, program eligibility and applicable fee restrictions before such a structure could be considered.
Convert the percentages to dollars
One discount point equals 1% of the loan amount. The rate reduction purchased is not a fixed exchange rate. See the CFPB explanation of points and lender credits (new tab).
To show the arithmetic without inventing the case’s purchase price, scale the question to each $100,000 of price. At 10% down and equal appraised value, the loan is $90,000. A 7.117-point cost would equal $6,405.30 for that $90,000 of borrowing.
For an eligible Fannie Mae principal-residence or second-home transaction at 90% LTV/CLTV, the general maximum financing concession is 6% of the lower of price or appraised value. Thus the scaled ceiling would be $6,000, not 6% of the loan amount. Contributions also cannot exceed eligible closing costs and cannot fund the down payment or required reserves. Verify the applicable Fannie Mae contribution rules (new tab); this is not a universal cap for every loan.
Reserve room for the rest of closing
In that scaled calculation, the point cost alone exceeds the $6,000 ceiling by $405.30. Other eligible expenses would compete for the same credit. The buyer would need sufficient acceptable funds for the remaining costs, or the structure would need to change. A negotiated seller credit is not additional unrestricted cash.
I would create separate columns for the point cost, other closing expenses, seller funds and buyer funds. Then I would identify which costs actually fall inside the applicable concession calculation. That keeps the contract request connected to the lender’s usable allocation.
Ask whether the rate is worth its cost
Even if the allocation works, the decision is not finished. Compare a lower-cost rate option, the cash left after closing and the expected time before the loan is paid off. A large upfront cost can take a long time to recover through payment differences.
I would also show what happens if the borrower sells or refinances earlier than expected. Future refinancing is uncertain, so it should not rescue a purchase that is uncomfortable under the actual note terms. An attractive payment deserves the same scrutiny as an attractive sticker price.
The next question to ask
Should I ask the seller for the maximum credit? First determine what the loan permits and what eligible costs can use. Compare the contract economics and a lower-price alternative with the agent and lender. The largest credit is not always the most useful arrangement.
Bring the proposed purchase price, down payment, credit request and written loan pricing. We can make the allocation visible and compare choices without treating a historical rate worksheet as today’s offer.
Published September 13, 2026. Adapted from an origination discussion I worked through. Identifying details are omitted. Figures describe the discussion or clearly stated calculations, not current loan offers or guaranteed outcomes. Program, property and borrower requirements need an individual review. Nick Cunningham, Loan Officer, NMLS #907393. Mortgage services through Golden Bay Mortgage Group.
