My loan officer and the agency guidance disagree about the concession cap

What's an overlay? I thought there was one rulebook per loan type.

rigging, an overlay is a lender or investor adding their own stricter condition on top of the program rules. Program says 620 credit, lender says 660. Nobody has to justify it.

vellum, cut the price. 425 to 414,375 gets you a lower loan, a lower payment, and one less line for an underwriter to argue about, and it fixes the appraisal problem in the same stroke since you're now under value. You stop being dependent on how one guy interprets a cap. Ten thousand of reserves is not nothing and you're about to trade it for years of a cleaner file.

flint, that only works if the cash exists. vellum, you said 19k reserves and a 10,625 fee. That's you closing with 8,400 and a house you've never owned before. I've watched two people do that and both of them had a water heater go in month four.

There's a middle version. Cut the price by half, keep a smaller concession sized to whatever the overlay actually allows once you see it in writing, and split the fee between the two mechanisms. Uglier, but you keep some cash.

On the appraisal point, yes, the limit is normally measured against the lesser of the sales price or the appraised value, so your base is 419,000 and every percentage you calculated is slightly wrong. Ask the lender to state which figure they're using, in writing, in the same email as the overlay answer.

Also, 419 on a 425 contract means you have a price conversation with the seller regardless. If you're going to reopen price anyway, reopen it once and settle the commission mechanism at the same time rather than in two separate rounds of amendments.

The seller cares about net proceeds and nothing else. 3% concession or an 11k price cut reads the same on their statement, roughly. So frame it to their agent as net-neutral and they'll usually sign whichever version your lender can live with. Where sellers get stubborn is when it looks like a second bite after the appraisal.

I went through the concession-versus-price version of this on a purchase last year and the part that nearly broke it was paperwork nobody thought about. My rep agreement said 2.5% payable by seller or by buyer, and when we restructured to a price cut, the title company still had the original compensation instruction from the listing side and drafted the settlement statement with the old number on it. We caught it two days out.

Whichever way you go, amend the rep agreement to match the new structure and send the amendment to the title company yourself. Don't assume it flows downhill from your broker.