January 14, 2013

Did you know that the Seller can provide assistance in paying for your closing costs when you are purchasing a home? In order for this to happen, you must negotiate this into your offer and/or sales contract.

For example, let's say your are purchasing a home for $200,000 and your closing costs (fees noted on your Good Faith Estimate) are 3% of the Sales Price ($6,000). In addition, let's assume you are applying for a FHA Insured Loan, which requires a 3.5% down payment on the purchase price. The down payment amount would be $7,000. By adding the Closing Costs and Down Payment, you would need $13,000 to bring to closing!

Now, assume you negotiate into your offer / sales contract that the seller will pay up to 3% towards your closing costs, then you would be bringing just your Down Payment to the closing in the amount of $7,000. These numbers are just estimates and not exact as your transaction will be based on many variables, including the actual purchase price.

So, depending on the financing program you will use, the closing costs allowed to be paid by the seller can vary. The information below shows what is allowed by various programs as of 1-14-2013, but please be sure to double check this information with your lender before making any offers to include closing costs:

FHA:

Allows up to 6%

VA:

Allows up to 8%

USDA:

No Set % is noted, so this is subject to the individual lender/investor in which you are obtaining a loan from

Fannie Mae & Freddie Mac (Owner Occupied):

Loan To Values of > 90.01% allow up to 3%

Loan To Values of 75.01% to 90% allow up to 6%

Loan To Values of < 75% allow up to 9%

Fannie Mae Home Path with Loan To Values of > 90% allows up to 6%

Non Owner Occupied / Investment Property

All Loan To Values Allow up to 2%

IMPORTANT NOTES:

All Closing Cost Allowances are subject to individual lenders and/or investor guidelines, so it is important to verify this information before you make an offer. All Closing Costs will be based on the Lower of the Sales Price or Appraised Value as lenders / investors do not loan over the Appraised Value nor will allow closing costs to be based on an amount higher than the Appraised Value.

If you would like a Free, No Obligation review of your loan scenario, I would be happy to offer my direct assistance. I can originate mortgage loans in all 50 States, so please feel free to contact me anytime for help! Have a Great Week!