What Closing Cost Can the Seller Pay?
Many buyers (particularly first-time buyers) are short the cash they need for the down payment and closing costs. One way to overcome this cash shortage is for the seller to pay a portion of the closing costs. How much the seller is allowed to contribute depends on the type of mortgage loan. Larger seller paid concessions are typical with larger down payments. We have zero down options. Showing you your least costly option to close and long term cost differences...we'll help you plan and make the decisions seem simple!
On a conventional loan, the seller can only pay non-recurring costs. These do not include pre-paid items or items to be paid in advance (such as mortgage insurance or hazard insurance). The seller's contribution is limited to the amount the buyer is putting down. If the buyer puts 10 percent or more down, the seller may contribute up to 6 percent. If the buyer puts less than 10 percent, the most the seller may contribute is 3 percent.
On a VA loan, the seller may pay all the closing costs (this is known as a "VA-No-No" - the buyer pays "no" down payment and "no" closing costs). Sellers who agree to pay the closing costs often put a ceiling on the amount they will pay. VA financing is tops for zero down...and they offer 100 percent cash-out refinance loans that we don't see with any other lending program now. We are lending pro's with every program but VA remains are favorite.
On a FHA loan, the seller may pay all the closing costs in most cases. However, the buyer must make a minimum 3 percent investment in the property - whether as part of the closing costs, a down payment or pre-paid items. The 3 percent can be from the buyer's own funds or from a family member's gift. We'll be offering a down payment assistance for a zero down FHA in Jan. 2017 if not earlier.
Asking the Seller to Pay a Portion or All of Closing Costs
The seller's willingness to contribute to closing costs is often driven by market conditions and the way in which the request is made to the seller. They are common. We can give you tips...we'll know early exactly what the closing cost will be down to the penny vs guessing. That always helps when making an offer with seller paid concessions. We're Real Estate Transaction pro's. Honest!
As your Mortgage Pro (along with your Buying Agent if you choose that path) we will help you prepare an offer that balances the purchase price and request for closing cost assistance with the dynamics of the current marketplace. For instance, in a seller's market we may increase the offered purchase price to offset the request for closing cost assistance. We've dealt with every kind of market...flipped distress properties...bought and sold for years...and made Big money every single time. We've practice what we preach and are expert buyers ourselves.
Remember - When you ask the buyer to pay a portion or all of your closing costs, in essence you are financing the closing costs. This is because the seller's contribution is typically offset by a higher purchase price. And it is this higher purchase price that is financed with your mortgage loan. If buying with the least amount of down payment is your plan...seller paid closing is a typical strategy to help. Let's find a value buy.
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