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  • Writer's pictureRebecca Richardson

Seller Paid Closing Costs

“What’s the maximum a seller can pay to buyer’s closing costs?” This is a question I’m often asked and the answer – as with many mortgage questions – is “it depends.”

Allowable seller concessions can cover quite a bit. Typically they are used to pay some or all of the following charges associated with obtaining a mortgage:

– origination fees, discount points, commitment fees

– appraisal costs, flood certifications, credit reports, tax service fees

– transfer taxes, stamps, attorneys’ fees, survey charges, title insurance premiums

– funds to subsidize a temporary or permanent interest rate buydown

Also seller concessions can cover prepaid items, such as:

– interest charges

– real estate tax escrows

– hazard insurance premiums

– HOA assessments covering any period after the settlement date

– mortgage insurance premiums

The difference on how much can be paid depends on the loan type. The following are the maximum percentage of the sales price that can go to a buyer’s expenses:

Conventional (primary or secondary)

3-5% down payment: 3%

10-25% down payment: 6%

25% or more down payment: 9%

Conventional (investment): 2%

FHA: 6%

VA: 4%

USDA: no limit but individual lenders can set a limit

When structuring a contract understanding what and how much the seller can pay on the buyer’s behalf can be beneficial to you and your client. If you ever have a question on what can be paid via seller concessions, please give me a call!

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