In a purchase transaction, when a seller gives the borrower funds from the closing to assist with the down payment or closing costs, it is known as a seller's concession. This is allowed in certain purchase transactions.
A seller's concession can help a borrower who is unable to produce a down payment or pay for closing costs, but still afford the new monthly payment, to purchase a home.
Typically, a seller merely increases the price of the sale of the residence to cover the costs incurred by the borrower.
While the seller's concession is noted and itemised in the sales contract, the actual transaction does not occur until the closing table.
Some lenders will not allow a seller's concession for a down payment, but will for closing costs. It is the borrower's responsibility to find a lender who will underwrite the mortgage in this manner prior to signing a sales contract.
While a mortgage transaction in which the seller gives the borrower funds at closing is called a seller's transaction mortgage by many borrowers, it is actually known as a mortgage with a seller's concession.