How much can the seller pay in closing costs?

How much can the seller pay in closing costs?

This is a common question that I receive and depending on the loan program, the answer can vary. Today’s video tip will keep you in the know on how to be prepared for your next offer.

So, how much can the seller pay in closing costs?

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-paids, otherwise known as settlement charges.

When determining how much can the seller pay in closing costs, this can vary depending on multiple factors.

Conventional Loans:

Primary Residences and 2nd homes allow for the following seller concessions:

3% of the sales price with less than 10% down payment

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.

FHA:

Currently, FHA will allow up to 6% of the sales price towards seller concessions regardless of down payment.

VA:

* Seller may pay all reasonable and customary closing costs and discount points without limit
* Seller may pay up to 4% of the purchase price toward items such as the following:
o Pre-paid expenses
o Funding fee
o Buy down fees
o Pay off of borrower liabilities, such as collections, judgments or other credit balances

USDA:
Up to 6% of the sales price permitted

Properly structuring the sales contract upfront can help save time and possibly help with the preliminary negotiations. By knowing the question of how much can the seller pay in closing costs, this can help get the transaction started off on the right foot.