How to apply seller credit for FHA loan

Sellers can pay a buyers closing costs up to 6% of the purchase price. So lets say you are buying a $200,000 home. Your required down payment is $7,000. You need to pay that no matter what. But the loan also has closing costs. Appraisal, credit report, title company, lender fees, state taxes, etc. Let's assume that totals another $6,000. Technically then, you would need $13,000 to buy the home. But you can negotiate with the seller to pay some, or all of the closing costs (up to 6% of the purchase price), effectively lowering your out-of-pocket costs back down to just your $7,000 down payment.

I'm not sure why you would turn to a blog post for answers to this type of question when your realtor or lender could have answered it in seconds, but in any case, you don't apply it.. You ask for it as part of your negotiations with the seller... whatever the seller allows, then between the lender and the title company, they will know how to deal with it.. But it has to be part of your sales contract.. Joe Metzler explained it perfectly... any contributions from the seller cannot be used as part of your down payment, and you can ask for up to 6% to pay the costs above what is required for the down payment..I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

The seller contibution is applied as a credit on the settlement statement.

And to add to this it must be listed on the REPC and or Addendums and if it may be possible that not all of them get used either.

Make sure you let your Realtor know you want a credit from the seller to pay your closing costs. The seller will have to agree to it and the house will need to appraise for the higher value.

FHA Loans will allow for up to a 6% sellers concession. Sellers concession can be applied to any settlement charges with the exception of the down payment.