Profile picture for windy321

In Oregon, how much can the seller/builder contribute to closing?

I just read a recent article that stated the seller can contribute as much as 9% if the buyer puts down 25% or more as a down payment.  Can this be correct?

  • November 22 2011 - Happy Valley
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Answers (7)

Best Answer

The lender will dictate how much the seller can contribute towards the buyer's closing costs.
  • November 24 2011
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The loan program dictates the cap on seller concessions not the lender although there may be some that have a lower cap, albeit obscure. Clay is correct however there are also two other loan programs he did not mention...

-VA which allows up to 4% in seller concessions which may also be used to pay Veteran's other debts.

-USDA Rural which actually has no max but "typical" for the area per the appraiser comments.  
  • November 25 2011
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Clay
I do understand what you are saying-but here in NJ and when I was in GA prepaids are considered part of the actual closing costs--RE: Costs to close. so yes the total 6% would be used--but if they are 5% total including pre-paids then the total allowed would be 5%.

I always tell my lenders that I got the 6% not to leave any money on the table and to buy down the rate if needed to use it all up


And FYI that statement came right off of the HUD FHA site

  • November 25 2011
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Not surprising that Clay, a lender, gave the only correct answer. Conventional 5% down financing is limited to 3% seller contribution and 6% for 5%-20% down. Though this question really is appropriate for the Mortgage Advice blog, I noticed that Agents are still attempting to answer mortgage questions on this and the Mortgage Advice blog.............
  • November 25 2011
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If you are buying as Owner Occupied or Second Home and no special program like Homepath, then yes, the IPC goes up to 9% with 25% or more down payment. If investment property then capped at 2%. The contribution can go towards closing costs and prepaids ( can not apply any to the down payment ). FHA is 6% regardless of down payment amount but with 25% down you would be wasting money paying the UFMIP and annual MI.
9% on a 200K loan amount = $18,000 which should easily exceed the actual closing costs and prepaids so any amounts not applied are lost.   Do you think you need 9%, if so why? What is the purchase price and taxes per year?  

"Generally this is what I know that FHA was going to reduce but it is still 6%of actual costs so if the contract reads 6% but the actual closing costs are 5% they can only contribute 5%."

If the closing costs are 5%, then an additional 1% will apply towards prepaids and the total 6% is used.
  • November 24 2011
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The lender will dictate. Generally this is what I know that FHA was going to reduce but it is still 6%of actual costs so if the contract reads 6% but the actual closing costs are 5% they can only contribute 5%.  and 3% for conventional. It also depends on if you are buying a property that is owner occupied investor loans. FHA is only for owner occupied and can be up to 4 units as long as 1 unit is owner occupied
Check with your lender about your particular circumstances.
  • November 24 2011
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Profile picture for Sharon Lewis
Depends on what type of loan you get also,if its a FHA they can only contribute up to 2% so you would seek to have the price lowered.
  • November 24 2011
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