What's a Seller Assist?
What's the maximum seller assist for FHA, VA, USDA and conventional mortgages? Can the seller pay my closing costs? Can the seller pay my down payment?
FHA, VA, USDA and conventional mortgages (loans underwritten to Fannie Mae and Freddie Mac guidelines) permit the seller to pay a percentage of your closing and escrow costs (however, the seller is not required to pay anything toward your costs).
The seller assist limit is based on the type of mortgage and the down payment percentage.
There are four primary
Each of these loan types permit the seller to pay a percentage of the buyer’s closing costs. The seller is not required to pay the buyer’s closing costs; however, the rules allow the seller to pay a percentage of the buyer’s closing costs if agreed to by the sales contract. Each mortgage “type” have their own seller assist guidelines and the limitation of the seller paid closing costs, commonly called “seller assist”.
The seller is never allowed to pay the buyer’s down payment ! ! !
FHA Mortgage Loan
LOAN: The Federal Housing Administration limits the seller
assist to the lesser of 6% of the
sales price or allowable closing costs, prepaid and escrow
Note: Contributions exceeding six percent are considered inducements to purchase. Reference: For information on inducements to purchase, see HUD 4155.12.A.4. Source: 4155.1
Fannie Mae & Freddie Mac
Think of Fannie Fannie Mae and Freddie Mac as your father’s
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”.
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 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.
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
The USDA does not impose a limit on the seller paid closing
costs, however, many lenders will unilaterally limit the seller
assist to 6%.
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.
wanted the seller to pay 6%, but at closing
the seller only paid 5%?
Which is better, asking the seller to pay a seller assist or making a lower offer?
Let's run a scenario and you decide.
Here's the bottom line . . if you make a full
price offer with the seller paying 6% toward your
closing and prepaid costs, your cash requirement
will be lower; but since the offer is for full
price, your monthly payment will be higher than an
offer at a lower sales price and no seller assist.
What's a FHA loan?
These pages contains a variety of information on FHA home loans.
What's a Fannie Mae Mortgage?
What's a Freddie Mac Mortgage?
What's a USDA home loan?
Believe it or not, the Department of Agriculture offers a home loan with NO down payment? That's right, 100% financing ! ! ! And the seller can pay a percentage of the sales price toward the home buyer's closing costs. Are you eligible? Read more
VA home loan
NO down payment with a veteran loan! That's right, 100% financing ! ! ! Read more
Home Buying Videos
Here are three great videos produced by the Department of Housing and Urban Development (HUD).Shopping for Your Home
Shopping for Your Loan
Closing the Deal