It's a buyers market out there right now, and it is customary for the seller to contribute to the buyers closing costs, but how much are they allowed to contribute?? The rules are different depending on which loan program you go with and what type of purchase your making... (primary residence, 2nd home, investment property). So Below are the guidelines for Conventional, FHA & VA

Conforming Conventional Mortgage:

2% of the purchase price for a mortgage secured by an investment property.

3% of the purchase price for a mortgage secured by a principal residence or second home if the Loan to Value ratio is greater than 90%

6% of the purchase price for a mortgage secured by a principal residence or second home if the Loan to Value ratio is in the range from 76%-90%

9% of the purchase price for a mortgage secured by a principal residence or second home if the Loan to Value ratio is 75% or less

FHA Loan:

Seller can contribute up to 6% of the purchase price toward closing costs and pre-paid items with a FHA Loan. HUD is considering a reduction from 6% to 3% however a formal announcement and official guideline change has yet to occur.

VA Home Loan:

Seller can contribute 100% of the buyers "normal" closing costs and pre-paid items. The max seller contribution beyond "normal" closing costs is 4%. Keep in mind there are fees a buyer obtaining a VA Home Loan cannot pay such as document preparation, underwriting, tax service, processing fees and escrow fee.

WilliamAcres.com