How much can a seller contribute towards closing costs for a buyer? What is the most a seller can contribute towards closing costs on USDA, VA, FHA, and Conventional mortgages?
How much can a seller contribute towards closing costs for a buyer? Due to the variety of questions we receive on our subject today, I feel it is important to give you the facts in order to help keep your all important financing headed to the closing table!
Obviously, the amount a seller can pay towards closing costs is contingent on what is able to be negotiated, but in today’s video tip I will explain what is the maximum a seller can contribute towards closing costs on each loan program.
But, before we get started, don’t forget to download our USDA Blueprint for Success with the link below. This free guide is designed to help walk you through the USDA qualifying process step-by-step and is ideal for both homebuyers and Realtors alike.
How much can a seller contribute towards closing costs for a buyer?
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-paid items, otherwise known as settlement charges.
- 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.
Currently, FHA will allow up to 6% of the sales price towards seller concessions regardless of down payment.
Seller may pay all reasonable and customary closing costs and discount points without limit.
Additionally, a seller may pay up to 4% of the purchase price towards any combination of the following:
- Pre-paid expenses
- Funding fee
- Buy down fees
- Payoff of borrower liabilities, such as collections, judgments or other credit balances
- 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.
Remember, not all lenders have experience with processing and closing USDA loans. I see this each and every day on the 2nd opinions that come across my desk.
As an approved USDA lender, we are known for our program expertise and have specific systems in place to process USDA loans from pre-qualification to closing.
Just call or email if you have any USDA qualifying questions, want to discuss a new scenario, or would just like to take advantage of our free 2nd opinion service which is great for those existing transactions.