Monday, November 14, 2011

Sellers Assist towards closing costs in a real estate transaction.

Mortgage companies permit the seller of a home, to pay a percentage of the buyer’s closing & prepaid costs.  That amount is considered "sellers assist".  Sellers who have equity in the home use this as a tool to market their property to cash strapped buyers.  Buyers who qualify for a mortgage and have savings to cover down payment, may use sellers assist to cover their closing costs.

There are however, limits to how much sellers assist lenders will allow.   If is often a function of  kind of loan, amount of down payment, value of the home, maximum amount of sellers assist allowed....

Conventional Loans:
Anything less than 10% down          Max of 3% assist
Anything 10%-24.99% down           Max of 6% assist
Anything 25% or more down           Max of 9% assist
**Investment Properties are always limited to 2% max assist

FHA Loans
Max of 6% assist.

VA Loans
Unlimited, but no more than 4% can go to recurring costs (pre-paids, escrows)

* Sellers assist has to be written into the initial offer or agreement of sale or lenders some may not allow it.
* Buyers must find out what their actual closing costs are going to be BEFORE the offer is made.  It is important because once you have negotiated the price based on a certain $$ amount of sellers assist - if it turns out that the actual closing costs are less than that amount, you may not be able to renegotiate with the seller.  
* Sellers must find out if their property will appraise at that amount.  If it does not - you are back to the drawing board with that buyer because most agreement of sales are contingent upon mortgage approvals.

Feel free to reach out if you have further questions on sellers assist.  A special thank you to Michael Lamborn, Mortgage Advisor Coldwell Banker Home Loans at C B Preferred - Exton, for the information.  Please consult your mortgage advisor for specifics in your situation.

Bela Vora, REALTOR®, 
Coldwell Banker Preferred - Exton
Office: 610 363 6006; Cell: (484) 947 3127
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