Interested Party Contributions in Mortgages

The cost of buying a home goes beyond the sale price. Closing fees can accumulate quickly and should be included in your budget. 

These additional expenses typically range from 2% to 5% of your home’s price and must be paid upfront at settlement.

The good news? You might not have to cover them entirely out of pocket. With the help of Interested Party Contributions (IPCs), some of those costs can be covered by other parties involved in the transaction. 

Here’s how IPCs work, who qualifies, and how they could help you lower your upfront costs.

What are interested party contributions?

Interested Party Contributions are funds a seller or another party connected to the sale provides to help you, the buyer, cover closing costs. 

IPCs cannot be applied to your down payment or used for extras like renovations or paying off debts. Their sole purpose is to reduce the out-of-pocket costs due at closing.

Often referred to as seller concessions, IPCs are only allowed under certain rules set by the mortgage program you’re using. 

Understanding those guidelines can help you better plan your negotiation and financing strategy.

Who qualifies as an interested party?

An interested party is any individual or entity that stands to benefit from the sale of the property. That includes:

• The home seller
• A builder or developer
• A real estate agent or broker involved in the sale
• Any affiliate or business with a financial interest in the transaction

Lenders and employers are not considered interested parties—unless they also have a direct stake in the property, such as being the seller.

How do IPCs work in a home sale?

Let’s say you find your dream home listed at $400,000, but you’re short on the $8,000 needed for closing costs. Here’s one way IPCs might come into play:

1. You and the seller agree to raise the sale price to $408,000.
2. The seller agrees to apply the additional $8,000 as a credit toward your closing costs.
3. You finance the home at the new sale price but effectively receive help covering the upfront fees.

This allows you to reduce the cash needed at closing without affecting the seller’s net proceeds. However, it’s important to remember that the property still needs to be appraised at the adjusted price for the deal to work.

What are the limits on IPCs by loan type?

Different mortgage programs set strict limits on how much assistance you can receive through IPCs. These limits are based on the loan type and, in many cases, the size of your down payment.

Here’s a quick breakdown of typical limits:

• Conventional Loans (Fannie Mae/Freddie Mac):
  • 3% if your down payment is under 10%
  • 6% if your down payment is 10–25%
  • 9% if your down payment is over 25%
• FHA Loans:
  • Up to 6% of the home’s value
• VA Loans:
  • Up to 4% of the loan amount
• USDA Loans:
  • Varies; consult with your loan officer

These numbers are subject to change based on agency rules. Be sure to review the latest guidelines with your mortgage advisor or refer to the Fannie Mae seller contributions page for up-to-date information.

When do IPCs make the biggest difference?

Understanding when IPCs can have the most impact can help you make smarter home-buying decisions. While they’re useful in many situations, IPCs are especially beneficial under the following conditions:

1. First-time buyers with limited savings

If you’ve saved enough for a down payment but are concerned about extra closing costs, IPCs can bridge the gap and help you close with confidence.

2. Buyers in a soft or buyer-friendly market

When inventory is high and competition is low, sellers are more likely to offer concessions. IPCs can become a powerful negotiating tool to reduce your out-of-pocket costs.

3. Buying new construction

Builders often offer closing cost incentives to keep projects moving. These IPCs may be applied as credits toward title services, lender fees, or prepaid costs, such as insurance or taxes.

Can IPCs cover more than closing costs?

No. IPCs are limited to actual closing costs documented in your Loan Estimate and Closing Disclosure. 

They cannot be used for:

• Down payment
• Paying off debt
• Furniture, appliances, or upgrades
• Cash back at closing

If your closing costs end up being lower than expected, any excess IPC funds cannot be converted into cash for you. They’re simply forfeited unless you renegotiate other deal terms before closing.

How can a lender help you use IPCs wisely?

While IPCs can be a helpful tool for reducing your upfront costs, they must be structured carefully to avoid compliance issues or unintended financial consequences.

At GO Mortgage, we can help you:

• Understand your loan program’s IPC limits
• Review whether your property will appraise at the increased price
• Calculate your monthly payment with the adjusted loan amount
• Ensure your IPC strategy meets both lender and agency guidelines

We’ll walk you through the numbers and offer a clear, honest picture of what works in your best interest.

Ready to explore your loan options? Connect with a GO Mortgage advisor today.

Is it the right strategy for you?

Interested Party Contributions aren’t the right fit for every homebuyer. Here’s when it might make sense:

IPCs may be helpful if

• You’re low on cash but qualify for a strong loan
• You’re buying in a buyer’s market where sellers are open to negotiation
• You want to reserve savings for moving costs or emergency funds

IPCs may not be ideal if

• You’re already maxing out your financing budget
• Raising the home price could risk a low appraisal
• You’re competing in a multiple-offer situation

To weigh your options fully, talk to a loan originator early in the home search process. They’ll help you explore all available homebuyer assistance, including IPCs, down payment programs, and more.

Take the next step toward affordable homeownership

Purchasing a home involves many steps, but expert guidance can help simplify the process. 

If closing costs are standing in your way, Interested Party Contributions might offer the boost you need to reach your goal.

Still have questions about IPCs or mortgage options? Start your homeownership journey with GO Mortgage today. 

We’ll help you find a financing plan that fits your needs—and gets you closer to moving day.