Joel Lobb Kentucky First-Time Home Buyers

Kentucky FHA Seller Concessions: The 6% Limit and What Sellers Can Pay

Updated November 4, 2026

On a Kentucky FHA loan, the seller and other interested parties can contribute up to 6% of the sales price toward your closing costs, prepaid items and discount points. They can’t pay your 3.5% down payment. On a $200,000 home, that’s up to $12,000.

What 6% Looks Like

Sales priceMaximum at 6%Your 3.5% minimum down payment
$150,000$9,000$5,250
$200,000$12,000$7,000
$250,000$15,000$8,750
$300,000$18,000$10,500

The 6% is a ceiling, not an amount you automatically get. The seller can only pay costs you actually have, and most buyers’ costs come in under the limit.

What the Seller Can Pay

  • Origination fees and other lender charges
  • Appraisal and credit report fees
  • Title and closing charges
  • Prepaid items, such as homeowner’s insurance and the tax and insurance escrow deposit
  • Discount points
  • Permanent or temporary interest rate buydowns
  • The 1.75% upfront mortgage insurance premium

Buydowns, mortgage interest payments and the upfront premium all count toward the 6%.

What the Seller Can’t Pay

  • Your minimum down payment. Your 3.5% has to come from an acceptable source, such as your savings, gift funds or approved down payment assistance.
  • More than your actual costs. Contributions above your actual origination fees, closing costs, prepaids and points are treated as an inducement to purchase.
  • More than 6%. This is also treated as an inducement.

An inducement reduces the purchase price dollar for dollar when your maximum loan is calculated, so going over can mean bringing more money to closing.

What Doesn’t Count Toward the 6%

  • Real estate commissions the seller typically pays under local custom or law.
  • Premium pricing credits from a lender or loan originator, as long as that party isn’t also the seller, real estate agent, builder or developer.

How to Ask for Seller Help on a Kentucky Home

  1. Get your numbers first. Ask for an estimate of your closing costs and prepaids so you request a real figure, not a guess.
  2. Put it in the contract. FHA requires contributions to be documented. A verbal promise won’t help you at closing.
  3. Write it as a dollar amount or a percentage “up to” your actual costs, so unused money doesn’t create a problem.
  4. Watch the appraisal if you raise the price. Some buyers offer more in exchange for seller help. That only works if the home appraises for the higher price.
  5. Read your Loan Estimate and Closing Disclosure. They list the costs and the seller credit, so you can compare them with your contract.

A Kentucky Example

Say you buy a $250,000 home in Louisville with 3.5% down and your closing costs and prepaids come to $9,000. Your down payment is $8,750. If the seller agrees to pay all $9,000, which is under the $15,000 limit, you’d bring about $8,750 to closing. These numbers are only an illustration. Your actual costs depend on your lender, rate, county, insurance and closing date.

Frequently Asked Questions

Can an FHA seller pay all of my closing costs?

Yes, if they agree and the amount stays within your actual costs and the 6% limit.

Can I use seller money for my down payment?

No. For help with the down payment, look at gift funds or KHC down payment assistance of up to $12,500.

Can the agent or builder contribute too?

Yes, but sellers, real estate agents, builders and developers are all interested parties. Their contributions are added together and count toward the same 6% limit.

Source: HUD Handbook 4000.1, Interested Party Contributions and Inducements to Purchase sections. See the full Kentucky FHA loan requirements.

Want to Know What to Ask the Seller For?

Call or text Joel Lobb at 502-905-3708, email kentuckyloan@gmail.com, or send me your question here.

Joel Lobb — Mortgage Loan Officer
NMLS #57916 | EVO Mortgage, Company NMLS #1738461

Equal Housing Lender. This information is for educational purposes only and is not a commitment to lend. All loans subject to credit approval, underwriting, property approval, and program guidelines, which can change without notice. Not affiliated with or endorsed by FHA, HUD, or any government agency.

Joel Lobb FHA Guidelines & Requirements, FHA Refinance (Streamline & Cash-Out)

Louisville Kentucky FHA Streamline Requirements

Louisville Kentucky FHA Streamline Requirements

Kentucky FHA Streamline loans can help homeowners lower monthly mortgage payments and interest rates. But what do you need to qualify for an FHA Streamline loan? To begin, you need an existing FHA mortgage—if you don’t have an Kentucky FHA loan but want to refinance, your options include conventional refinancing or applying for an Kentucky FHA refinancing loan.

If you have a conventional loan you wish to refinance with an FHA refinancing loan, you’ll need to apply with the usual credit check, employment verification, debt-to-income ratio requirements and other considerations. An FHA Refinancing loan can get you many of the same results—if you refinance from a conventional loan to an FHA-insured refinancing loan you may get better rates and lower payments.

For those who do have an Kentucky FHA home loan, the other requirements for FHA Streamline include:

  • Being current on the existing loan with all mortgage payments made on time for the last year.
  • You must own the original property for at least six months before you can qualify for refinancing.
  • To refinance you’ll need an FHA-approved lender. If you don’t want to use your current lender, any bank you choose must be FHA approved.
  • FHA Streamline loans do not require an appraisal, but a no-appraisal loan cannot exceed your current loan.
  • Closing costs must be paid up front or arranged for through a “no-cost” FHA Streamline loan. You may also choose to include the closing costs into your loan a “with appraisal” FHA Streamline loan. In these cases you must have enough equity in the home to cover the extra amount.

There is another Streamline product made for those who want a refinancing plan to help them modify or improve the home. This is known as an FHA Streamline 203(k) Loan. The 203(k) is similar to ordinary Streamline loans with a few exceptions.

  • The 203(k) has a minimum of $5,000. The maximum loan amount is $35,000. This amount is added to your mortgage for weatherizing your home, removing lead paint and many other home improvements that don’t involve major alterations of the home.
  • You are required to use at least one contractor to do the repair work. Self-help renovations are not allowed unless the borrower can prove they have proper expertise.
  • When choosing a contractor, FHA guidelines state you must get an estimate which is broken down into specifics regarding the costs of each project. Contractors must sign an agreement to do all the work included in the estimate for the amount and within the time specified.
  • You must obtain all permits required by law.

There are restrictions on 203(k) Streamline refinancing loans. You cannot use the 203(k) loan to do major structural repairs such as altering a load-bearing wall or work that needs architectural plans. If your home improvement work exceeds $15,000 the FHA requires you to have a third-party inspection after the job is done.
You are permitted to make two payments to each contractor. If you do the work yourself as a qualified builder, the same rule applies.

When borrowing under the FHA Streamline 203(k) program you must “close out” the loan when the work is complete. According to FHA.gov, you may be required to furnish “mortgagor’s acknowledgement of satisfactory completion…mortgagee’s inspection report(s), change orders, mortgagee accounting of the escrow funds, and record of disbursements.” It’s important to keep records of these items and more to prove the work was completed according to the agreement and in a timely manner.