How much can the seller pay in closing costs?

February 12, 2016 86 No Comments

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How much can the seller pay in closing costs

This is a common question that I receive and depending on loan program, the answer can vary. Today’s video tip will give you the details to be prepared on your next offer.

Commonly referred to as seller concessions, this is the amount that can be negotiated within the sales contract to help the buyer(s) with customary out of pocket expenses such as closing costs or pre-paids, otherwise known as settlement charges.

The maximum seller concessions allowed can vary depending on multiple factors.

Conventional Loans:
Primary Residences and 2nd homes allow for the following seller concessions:
3% of the sales price with less than 10% down payment
For down payments of 10 or greater permit up to 6% of the sales price

Investment properties are capped at 2% of the sales price regardless of down payment amount.

FHA:
Currently, FHA will allow up to 6% of the sales price towards seller concessions regardless of down payment.

VA:
*Seller may pay all reasonable and customary closing costs and discount points without limit
*Seller may pay up to 4% of the purchase price toward any combination of the following:
o Pre-paid expenses
o Funding fee
o Buy down fees
o Payoff of borrower liabilities, such as collections, judgments or other credit balances

USDA:
Up to 6% of the sales price permitted

Properly structuring the sales contract upfront, can help save time and potentially strengthen the offer. If you have any financing questions which pertain to the loan program for the buyer and how it relates to the sales contract, please contact my office so we can help.

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Closing cost

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