USDA Finalizes Rural Mortgage Rule Excluding Agent Commissions From Seller Concession Cap

The U.S. Department of Agriculture has finalized a rule that removes real estate commission fees from the 6% seller-concession limit on mortgages backed by its Single Family Housing Guaranteed Loan Program. The change is intended to prevent agent compensation from reducing the amount a seller can contribute toward a rural buyer’s other eligible closing expenses.

The Rural Housing Service rule, published November 9 and effective the same day, amends 7 CFR 3555.102(h). Seller or other interested-party payments toward covered mortgage financing costs, closing costs, escrow accounts and certain other items remain subject to a cap based on the home’s sale price. Real estate commissions are now expressly excluded from that calculation.

For eligible borrowers, the distinction can matter when a purchase agreement calls for a seller to pay an agent’s commission as well as provide assistance with closing costs. USDA is not requiring sellers to pay commissions, and it has not raised the percentage limit on other concessions. Instead, it is clarifying which payments count toward that limit.

How the 6% seller-concession calculation works

Under the USDA’s final rule, the basic 6% ceiling continues to be measured against the property’s sales price, unless the agency provides otherwise. A seller’s contributions to the buyer’s allowable financing and settlement expenses generally count toward that ceiling. A real estate commission paid in connection with the sale does not consume any of the available allowance.

Consider a hypothetical home sold for $250,000. Six percent of the sale price is $15,000. If the seller agrees to pay $6,000 in qualifying closing costs, that amount counts toward the $15,000 ceiling. A separately negotiated real estate commission would be excluded from the calculation. The example illustrates how the rule works, not an entitlement to receive $15,000 in seller assistance.

That separation could preserve room for assistance with expenses such as mortgage financing charges, prepaid items and escrow funding. It may be especially relevant to households that qualify for a no-down-payment USDA loan but still face cash expenses when they buy a home. The precise treatment of each cost remains subject to the program’s eligible-use rules and lender review.

The regulation covers real estate commission fees rather than establishing a standard commission rate or deciding who must pay an agent. Buyers and sellers still need to agree on their respective obligations, and the resulting charges must satisfy applicable requirements. A commission being outside the concession calculation does not make an unrelated expense eligible for USDA financing or seller assistance.

A regulatory clarification after changes in agent compensation

USDA proposed the amendment in April, pointing to changes in real estate commission practices following nationwide litigation and a settlement involving the National Association of Realtors. The agency said buyers could increasingly be responsible for their own agent fees or negotiate for sellers to cover those costs in the purchase agreement. Treating such a payment as a standard seller concession risked leaving less room for other closing expenses.

In its proposal, Rural Housing Service also described the approach taken by other major mortgage programs. The agency said the Federal Housing Administration, the Department of Veterans Affairs, Fannie Mae and Freddie Mac generally allow qualifying, reasonable real estate commissions to be excluded from their applicable interested-party contribution calculations. The USDA amendment is designed to make the guaranteed rural program’s regulatory language consistent with that treatment.

The new wording is important, but it should not be confused with an entirely new permission for sellers to cover buyer-agent compensation. USDA lender guidance revised in December 2025 already stated that funds a seller provides for the buyer’s real estate commission fees are not included in the interested-party contribution limit. The final rule puts the exclusion directly into the binding regulation, removing ambiguity between that guidance and the older rule text.

The distinction between guidance and regulation was a central reason for the rulemaking. Before the amendment, the regulatory language described seller-paid financing and closing expenses broadly, without expressly identifying commissions as exempt. The finalized text now gives lenders a clearer basis for calculating concessions when a seller agrees to contribute toward a buyer’s agent fees.

USDA received comments from 11 respondents on the proposal. Ten supported the exclusion. One agreed it could help homebuyers but warned that the provision might be misused to deliver improper rebates. The agency made no change in response to that objection, saying safeguards already in place address the risk.

Existing borrower protections and loan requirements remain

Rural Housing Service emphasized that lenders must comply with consumer financial protection requirements and may not use the commission provision to sidestep limits on fees. USDA rules require reasonable and customary charges, and the agency bars applicants from receiving cash back at closing beyond reimbursement of eligible out-of-pocket expenses. The final rule did not remove those restrictions.

The agency’s lender FAQ offers further examples of what seller contributions cannot do. Interested-party funds cannot be used to pay off a borrower’s personal debt to qualify for a mortgage. Excess seller-paid amounts cannot simply be handed to the homebuyer as cash. These restrictions still matter even though real estate commissions are excluded from the percentage calculation.

The amendment applies to USDA’s Section 502 guaranteed loan program, which helps approved private lenders make mortgages available to eligible low- and moderate-income households purchasing homes in qualifying rural areas. Eligible borrowers may obtain 100% financing, but they must meet the program’s income, occupancy, property and underwriting requirements. The commission rule does not change those tests or guarantee approval of a particular loan.

USDA says the seller-concession clarification can leave more room for assistance with legitimate closing expenses or needed repairs. That may reduce the amount of personal savings some buyers must spend at settlement, depending on the terms negotiated with the seller. The agency has not published an estimate in the final rule of how many homebuyers will benefit or how much their closing costs will fall.

For lenders processing guaranteed loans, the immediate operational change is straightforward: identify real estate commission fees separately when reviewing seller or other interested-party contributions, then apply the 6% test to the expenses that remain within its scope. Borrowers should still have their lender review the purchase agreement and settlement figures to confirm which charges qualify under USDA rules.