Rodney Reynolds Discusses Seller Paid Closing Costs
Hello, this is Rodney Reynolds, your mortgage guy. Hope today is going well. Today’s topic that we hear quite a bit is how much can a seller contribute toward a buyer’s closing cost.
Well, different amounts can be contributed, which we call seller concessions based on the type of loan that you’re applying for.
So, let’s briefly go over what’s allowed.
FHA or USDA Financing Seller Concession Limits
If you’re applying for FHA financing or USDA financing, the max allowed, regardless of the purchase price, is 6%.
VA Financing Seller Concession Limits
If you’re applying for VA financing, the maximum allowed concessions are 4%.
Now, what’s unique about VA is that, let’s just say you don’t need 4%, but you have some high-interest credit cards that affect your income-to-debt ratio and the amount of home you can purchase. The seller can pay those credit cards off at closing as long as it’s written into the contract that this 4% will be used to pay off the buyer’s closing costs, prepaids, and buyer’s credit cards. VA allows that to be paid at closing. That’s a beautiful provision that VA allows.
Conventional Financing Seller Concession Limits
What if you’re doing the conventional financing? Well, there’s a scale for conventional financing.
The scale consists of if you’re putting down up to 5%, 3% is a max seller concession.
If you’re putting down 10%, 6% is a max seller concession.
If you’re putting down 25%, 9% is a max seller concessions allowable.
Investment Property Seller Concession Limits
Also, if you’re buying an investment property, what’s the maximum seller concessions allowed by Fannie Mae?
The max seller concession on an investment property purchase is 2%.
On all investment property purchases, which use conventional financing, 2% is the maximum allowable seller concession.
So that’s just a brief overview of the various concessions allowed based on loan product. Once again, thank you for your time. This is Rodney Reynolds, your a mortgage guy. Have a great day and please remember all of my contact info is listed below. So any questions you have, please reach out to me.
Email: rodney.reynolds@ruoff.com
Direct Line: 440-882-5403
Fax: 440-398-8173
NLMS # 190606 LO# 036126.000 MB# 803389.000
Ready to get the home-buying process started? Contact us today at (440) 628-1321
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