Seller Assist | Seller Assist Calculator | Good Faith Estimate (GFE)
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What's a Seller Assist?
There are four primary mortgage choices - FHA, which stands for
Federal Housing Administration, VA, a loan reserved for eligible
veterans, USDA, United States Department of Agriculture and conventional.
A conventional loan is a mortgage underwritten to either the Federal
National Mortgage Association (Fannie Mae) or the Federal Home Loan
Mortgage Association (Fannie Mae). The seller is never allowed to pay the buyer’s
down payment ! ! ! FHA Mortgage Loan
3. Interested Third Party Contributions - 4155.1 2.A.3.b The seller and/or third party may contribute up
to six percent of the lesser of the property’s sales price or the
appraised value toward the buyer’s closing costs, prepaid expenses,
discount points and other financing concessions. The six percent
limit also includes
Note: Contributions exceeding six percent are considered inducements
to purchase. Fannie Mae + Freddie MacCONVENTIONAL
MORTGAGE: Think of Fannie Fannie Mae and Freddie
Mac as your father’s mortgage
Veteran Home Loan (VA)
VA MORTGAGE:
The Veterans Administration permits the seller to pay all
customary closing costs. In addition the allowable closing
costs, the seller is permitted to pay the escrow and prepaid costs
up to 4% of the sales price. a. Policy: The seller, lender, or any other party may pay 5. VA Seller Concessions Change Date - November 08, 2010, Change 15 - This section has been updated to make minor grammatical edits. a. Definition For the purposes of this topic, a seller concession is anything of value added to the transaction by the builder or seller for which the buyer pays nothing additional and which the seller is not customarily expected or required to pay or provide. b. Seller Concessions - Seller concessions include, but are not limited to, the following:
Seller concessions do not include payment of the buyer’s closing costs, or payment of points as appropriate to the market. Example: If the market dictates an interest rate of 7½ percent with two discount points, the seller’s payment of the two points would not be a seller concession. If the seller paid five points, three of these points would be considered a seller concession. c. The Problem - In some localities, builders or sellers offer concessions as a competitive tool. In extreme cases, the concessions may entice unwary and unqualified veterans into home mortgages they cannot afford. The concessions may disguise the veteran’s inability to qualify for the loan. d. The Four Percent Limit - Any seller concession or combination of concessions which exceeds four percent of the established reasonable value of the property is considered excessive, and unacceptable for VA-guaranteed loans. Do not include normal discount points and payment of the buyer’s closing costs in total concessions for determining whether concessions exceed the four percent limit. SOURCE: Department of Veteran Affairs USDA Home Loan
SOURCE: USDA Frequently Asked Questions.pdf Consult with a mortgage professional concerning limits and allowable costs paid under these mortgage programs. The seller assist cannot be used to pay the down payment . . . only closing, escrow and prepaid costs. I wanted the seller to pay 6%, but at closing the seller only paid 5%?It can happen. The seller is only permitted to pay your closing and prepaid expenses UP TO THE LIMIT PERMITTED BY THE LOAN PROGRAM OR THE TOTAL OF THE CLOSING AND PREPAID COST - WHICHEVER IS LESS. For example, let's say you asked the seller to pay $6,000 or 6% of the sales price, but when the final numbers came in, the closing and prepaid expenses added up to $5,000, in this case, the seller is only permitted to pay $5,000. Remember, the extra $1,000 cannot be used for down payment. That's your investment in the purchase. That extra $1,000 goes to the seller. Be careful not to ask too much seller assist. Always consult with a mortgage professional prior to making your offer. Which is better, asking the seller to pay a seller assist or making a lower offer?Let's run a scenario and you decide. Column 1 - Sales price of $100,000 with a 6% seller assist ($6,000)
- FHA mortgage As you can see, your total cash to purchase this home is less in Column 1, because the seller is paying $6,000 (6% X sales price) toward your closing costs. However, the payment is higher than in column 2 because the mortgage amount is higher.
Home Buying Information
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based on the type of mortgage.
(i.e.
5%, 10%, 15%, 20% down payment). If the loan is not an alphabet
mortgage (i.e. FHA, VA, USDA), it’s probably a Fannie Mae or Freddie
Mac loan, also known as a “conventional mortgage”.
fees and charges, including discount points, on behalf of the
borrower. VA regulations limit charges “made against
or paid by” the borrower. They do not limit the payment of fees
and charges by other parties
The USDA does not impose a limit on the seller paid closing costs,
however, many lenders will unilaterally limit the seller assist
to 6%.
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