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True that seller-funded closing costs limited to 3% if downpayment less than 10%

We are buying an REO for $275000, and the seller (GMAC) is allowing us $10000 toward closing costs. However, our mortgage broker just told us that recent changes in the guidelines mean that lenders will only allow 3% ($8250) of the sale price to be paid toward closing costs by the seller. Is this true? Where can I find more information? by island_720_175 from Austin, Texas. Sep 28th 2011 Reply


Stacye Beaver (sbeaver)
#15 ranked lender in Oklahoma - 3 contributions

This is true. It is a Fannie Mae and Freddie Mac guideline. If you would like to research the guideline you may be able to access the lender guidelines at www.fanniemae.com or www.freddiemac.com or ask your mortgage broker to supply you with the guideline. You can finance under FHA which allows the seller to pay up to 6% of the sale price in your closing costs and prepaids and the down payment is 3.50%.

Sep 28th 2011
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Corey Barcus (Mtg_Pro)
#44 ranked lender in Pennsylvania - 16 contributions

That is true. However as sbeaver mentioned you can always go the FHA route. That would allow you to get the full $10,000. Ask your broker about FHA loans. If they do not offer FHA, I would be glad to help: cbarcus@gmx.com or 412-328-3241. We are a Federally Chartered Bank that lends in all 50 states.

Sep 28th 2011
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Mary Papageorge (MaryPapageorge)
#91 ranked lender in Texas - 54 contributions

That is correct on a Conventional loan - unless you choose to put down 3.50% then we could do an FHA loan, which will allow for up to 6% in contributions. The maximum loan amount for FHA is $271,050, which would work with the 3.50% down. The rates are actually better on an FHA loan, and the mortgage insurance is lower on a monthly basis.

Sep 28th 2011
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James Barath (JamesBarath)
#9 ranked lender in Indiana - 352 contributions

You can always ask your mortgage broker for a print out from the Fannie Mae Single Family 2011 Selling Guide. The manual itself is vast and I would not suggest reading. Here is the direct link to the specific section of the manual. http://www.allregs.com/tpl/documentPrint.aspx?did3=2c53c3cf-0f4a-459e-bba1-a3ef0684440b&lid=b26979a8-c941-47cb-86f5-97b55d7f9a39

Sep 28th 2011
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William J Acres (William_Acres)
#74 ranked lender in Arizona - 8,728 contributions

The big question is... Investment, primary residence, 2nd home.... because the contributions are different for all 3... but based on your question, that is correct... although, I agree with everyone else.. you should be considering FHA... lower down payment, higher allowable costs to be paid by seller, and better rates.. WilliamAcres.com

Sep 28th 2011
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Nancy J Releford (nancyreleford)
#4 ranked lender in Tennessee - 233 contributions

If it is a homepath property meaning Fannie owns the property see below of what is allowed:oBuyers and/or selling agents (the agent representing the buyer) must request the incentive upon submission of initial offer.oInitial offer must be submitted on or after June 14, 2011 and close by October 31, 2011. Initial offers made prior to June 14 are not eligible for the June 14 - October 31 incentive.oSale must close on or before October 31, 2011. No exceptions will be made to this deadline. (Note: Initial offers submitted after September 15, 2011 may not close by the incentive deadline of October 31, 2011.)oBuyers must be purchasing a HomePath property to use as their primary residence to receive closing cost assistance. Second homes and investment properties are excluded from the incentive. oSales closed via the retail channel are eligible, including those utilizing public funds. Pool and auction sales are ineligible.oBuyers must sign the Owner Occupant Certification Rider to the Real Estate Purchase Addendum.oBuyers with total closing costs under 3.5% are not eligible to receive the difference as a credit.oProperties where Fannie Mae acquired the property in connection with financing under a reverse mortgage are not eligible. Ask the listing agent for details.oBuyers should consult their lenders for guidance on financing. Lenders and mortgage products may impose their own limitations on the use of the 3.5% incentive. For example, the lender may consider the incentive a Seller Contribution and limit the amount to 3.0%. In those instances, the remaining 0.5% will no longer be available to the buyer.oFannie Mae reserves the right to remove any property from promotion or end the promotion at any time. Any dispute over the payment of the incentive shall be resolved by Fannie Mae in its sole discretion.

Sep 28th 2011
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