Yes, a realtor can contribute to your closing costs, most often by crediting part of their commission back to you at settlement. Because buyer closing costs typically run 2% to 5% of the purchase price, even a partial credit can save you thousands at the table. How much your agent can put toward those costs depends on your loan type, your lender’s contribution caps, and whether your state allows commission rebates at all.
How the Credit Actually Works
When an agent agrees to put part of their commission toward your closing costs, the amount appears as a credit on your closing disclosure and directly reduces the cash you owe at settlement. Agents sometimes offer this to keep a stretched deal together, and sometimes as a competitive perk to win your business up front.
A realtor credit is not the same thing as a seller concession, though your lender treats them similarly. A seller concession comes out of the seller’s proceeds. A realtor credit comes out of the agent’s earnings. Both count as contributions from an “interested party,” which is the category lenders use to cap how much outside help you can accept.
What Changed After the 2024 NAR Settlement
The National Association of Realtors settlement that took effect in August 2024 changed how buyer-agent compensation gets set, and that in turn changed how closing-cost credits get negotiated. Before the settlement, sellers routinely advertised buyer-agent compensation through the MLS, giving agents a commission pool they could dip into for a credit. That mechanism is gone.
Under the current rules, the MLS can no longer include offers of compensation to buyer agents. You must sign a written agreement with your agent before touring homes, and that agreement has to spell out the exact amount or rate the agent will earn. It must also state that the agent cannot receive compensation from any source exceeding what you agreed to pay.
In practice, your agent’s fee is now negotiated openly at the start, and any closing-cost credit comes out of that fee. If your buyer agreement sets the agent’s compensation at 2.5% and the agent offers a 0.5% credit, the agent nets 2%. Sellers can still agree to cover buyer-agent compensation, but that has to be negotiated in the purchase offer rather than posted in the listing.
Every listing and buyer agreement must now include a conspicuous disclosure that broker compensation is not set by law and is fully negotiable.1National Association of REALTORS®. Summary of 2024 MLS Changes That line gives you room to raise a credit as part of the buyer agreement itself.
How Much Can an Agent Credit You?
Your lender caps how much any interested party can contribute toward your closing costs, and the agent’s credit falls under that cap along with anything the seller kicks in. The rules prevent inflated sale prices that hide what would otherwise look like gifts to the buyer. Contributions can’t exceed your actual closing costs, and they can’t be applied to your down payment.
Conventional Loans
Fannie Mae and Freddie Mac tie the cap to your loan-to-value ratio, applied to the lower of the sales price or appraised value:
- Less than 10% down (LTV above 90%): up to 3%
- 10% to 25% down (LTV 75.01%–90%): up to 6%
- More than 25% down (LTV 75% or less): up to 9%
- Investment property (any LTV): up to 2%
Contributions above these limits get deducted from the sales price, and the lender then recalculates your maximum loan amount using the reduced figure. Fees the seller customarily pays in your area, such as transfer taxes or owner’s title insurance in states where that’s standard, do not count against the cap.2Fannie Mae. Interested Party Contributions IPCs
FHA Loans
FHA allows interested parties to contribute up to 6% of the sales price toward origination fees, closing costs, prepaid items, and discount points. The 6% cap also covers upfront mortgage insurance premiums and interest-rate buydowns.3U.S. Department of Housing and Urban Development. FHA Handbook 4000.1 Anything above 6% or above your actual costs reduces the property’s adjusted value dollar-for-dollar before the lender calculates your loan. Contributions cannot go toward the 3.5% minimum down payment.4U.S. Department of Housing and Urban Development. FHA FAQ – What Costs Can a Seller or Other Interested Party Pay on Behalf of the Borrower
VA Loans
VA loans separate normal closing costs from what the VA calls “seller concessions.” The VA does not cap credits toward standard closing costs like origination fees, appraisal fees, or title charges. It does limit concessions to 4% of the home’s reasonable value, and concessions include prepaid property taxes, prepaid hazard insurance, the VA funding fee, and paying off any of the buyer’s existing debts.5U.S. Department of Veterans Affairs. VA Funding Fee and Loan Closing Costs A VA buyer can end up with more total help than 4% suggests, because ordinary loan-related costs sit outside that limit.
USDA Loans
The USDA guaranteed loan program caps interested party contributions at 6% of the sales price, and contributions must be applied to eligible closing costs.6United States Department of Agriculture. USDA Single Family Housing Guaranteed Loan Program Handbook – Chapter 6 Loan Purposes
What the Credit Can Pay For
A realtor credit can be applied to costs you would otherwise pay out of pocket at settlement. That typically covers your loan origination fee, appraisal fee, lender’s title insurance (and sometimes the owner’s policy), recording fees, prepaid property taxes and insurance held in escrow, attorney fees where a closing attorney is required, and discount points to buy down your rate.
Credits cannot be applied to your down payment on any loan type, and they can’t be paid to you in cash. If the credit exceeds your actual closing costs, the excess is either lost or triggers a reduction in your loan amount, depending on the program. Estimate your closing costs before you negotiate a specific credit amount, so you don’t leave money on the table or push past what your lender will allow.
Some States Restrict Commission Rebates
Federal law permits commission credits to buyers when the credit is disclosed in the purchase agreement and on the closing disclosure, because the credit reduces the agent’s fee rather than functioning as a hidden referral payment.7Office of the Law Revision Counsel. 12 USC 2607 – Prohibition Against Kickbacks and Unearned Fees State law is another matter. Roughly nine or ten states restrict or prohibit real estate agents from rebating part of their commission to buyers. Alabama, Alaska, Iowa, Kansas, Mississippi, Missouri, Oklahoma, Oregon, and Tennessee are commonly cited, though the specifics vary.8U.S. Department of Justice. How Rebate Bans, Discriminatory MLS Listing Policies, and Minimum Service Requirements Can Reduce Competition
If you’re buying in one of those states, your agent may not be able to offer a direct commission credit. The usual workaround is to negotiate a seller concession that covers part of your closing costs instead. Check your state real estate commission’s website for current rules, since this area has been shifting.
Is a Realtor Credit Taxable?
No. A commission credit applied at closing is treated as a reduction in the home’s purchase price rather than income to you. It lowers your cost basis in the property instead of showing up as taxable earnings. IRS Publication 551 lists rebates treated as adjustments to the sales price among the items that decrease basis.9Internal Revenue Service. Publication 551 – Basis of Assets
The practical impact is small for most owners. A lower basis means a slightly larger gain when you eventually sell, but the Section 121 exclusion shelters up to $250,000 of gain on a primary residence ($500,000 for married couples filing jointly). For an investment property, the lower basis can matter more because that exclusion doesn’t apply. If a broker mistakenly sends you a Form 1099-MISC treating the credit as income, ask them to correct it before the IRS matches it against your return.
Negotiating a Credit
Raise the credit before you sign the buyer agreement, not after. That agreement locks in your agent’s compensation under the post-settlement rules, so any credit should be part of the same conversation. An agent who agrees to 2% with a 0.5% credit is effectively working for 1.5%, and not every agent will take that deal.
Agents tend to be more open to credits in a slow market, on higher-priced homes where the total commission is large, or when you’re an easy client to work with: pre-approved, decisive, not asking for dozens of showings. On a $500,000 home at 2.5%, the agent earns $12,500. A $3,000 credit still leaves $9,500, which many agents view as reasonable for a smooth transaction.
Whatever you agree to, get it into the purchase agreement and confirm it appears on your closing disclosure. Verbal promises don’t survive the closing process. Ask your loan officer early whether the credit fits within the interested-party contribution cap for your loan type, so the numbers hold up when the file goes to underwriting.