Q. What's the maximum seller assist for FHA, VA and conventional mortgages?
A. FHA, VA 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. Your cash at closing consists of three components |down payment | closing costs |escrow and prepaid costs|. The seller assist limit is based on the type of mortgage. For example, an FHA mortgage limits the "seller assist" to 6% of the sales price. The VA permits the seller to pay all closing costs and the escrow and prepaids up to 4% of the sales price. For a conventional loan, the seller is permitted to pay 3% of the sales price when your down payment is less than 10%. For down payments of 10% - 24%, the seller can pay up to 6% of the sales price. For down payments of 25% or more, the seller can pay up to 9% of the sales price. 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. Buyers can calculate the seller assist with the PA Home Buyer Purchase Estimate Calculator. Sellers, you can estimate the cost of the seller assist with the PA Home Seller | Seller Closing Cost Calculator | Seller Net Proceeds Q. I wanted the seller to pay 6%, but at closing the seller only paid 5%?
A. 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.
Q. Which is better, asking the seller to pay a seller assist or making a lower offer?
A. Let's run a scenario and you decide.
The following example assumes that the house is listed at $100,000 and the seller desires to "net", or sell the house for $94,000. This example also assumes that the real estate taxes are $3,600 per year, and the homeowners insurance is $480 per year.
Column 1 - Sales price of $100,000 with a 6% seller assist ($6,000) - FHA mortgage
Column 2 - Sales price of $94,000 no seller assist - 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. | CLOSING COSTS | | COLUMN 1 | | COLUMN 2 | | | | | | | | MONTHLY PAYMENT | | $972.92 | | $934.95 | | TOTAL CASH TO PURCHASE | | $4,847.43 | | $10,507.07 | | | | | | | | Mortgage Program | | FHA | | FHA | | | | | | | | SALES PRICE | | $100,000.00 | | $94,000.00 | | Annual Real Estate Taxes | | $3,600.00 | | $3,600.00 | | Annual Homeowners Insurance | | $480.00 | | $480.00 | | Condo | Hm Assn Monthly Fee | | | | $0.00 | | | | | | | | Down Payment Percentage | | 3.50% | | 3.50% | | | | | | | | Interest Rate | | 6.000 % | | 6.000 % | | Term | | 30 Years | | 30 Years | | Point(s) | | | | | | | | | | | | Seller Assist Percentage | | 6% | | 0% | | Seller Pays a Flat Dollar Amount | | | | | | | | | | | | Deed Transfer Tax To Buyer | | 1.00% | | 1.00% | | | | 0.00% | | 0.00% | | | | | | | | DETAILS OF THE TRANSACTION | | | | | | | | | | | | DOWN PAYMENT AMOUNT | | $3,500.00 | | $3,290.00 | | CLOSING COSTS | | $2,614.75 | | $2,518.75 | | ESCROW | | $4,732.68 | | $4,698.32 | | Less Hand Money | | $0.00 | | $0.00 | | Less Seller Assist | | $6,000.00 | | $0.00 | | TOTAL CASH TO PURCHASE | | $4,847.43 | | $10,507.07 | | | | | | | | CLOSING COSTS | | | | | | | | | | | | Appraisal Fee | | $300.00 | | $300.00 | | Courier Fee | | | | | | Credit Report | | $18.00 | | $18.00 | | Deed Transfer Tax | | $1,000.00 | | $940.00 | | Discount Point (s) | | $0.00 | | $0.00 | | Document Preparation | | | | | | Flood Certification | | $18.00 | | $18.00 | | Mortgage Broker Fee | | $0.00 | | $0.00 | | Notary Fee | | $25.00 | | $25.00 | | Origination Points (s) | | $0.00 | | $0.00 | | Pest Inspection | | | | | | Processing Fee | | $0.00 | | $0.00 | | Real Estate Agency Fee | | $0.00 | | $0.00 | | Recording Fees | | $120.00 | | $120.00 | | Septic Inspection | | | | | | Settlement Fee | | $125.00 | | $125.00 | | Survey | | | | | | Tax Service | | $0.00 | | $0.00 | | Title Endorsement | | $150.00 | | $150.00 | | Title Insurance (Basic) | | $858.75 | | $822.75 | | Underwriting Fee | | $0.00 | | $0.00 | | Well Inspection | | | | | | TOTAL CLOSING COST | | $2,614.75 | | $2,518.75 | | | | | | | | ESCROW & PRORATIONS | | | | | | | | | | | | 30 days per diem (close on 1st day) | | $484.22 | | $455.17 | | Hm Insurance Policy | | $480.00 | | $480.00 | | Hm Insurance Escrow | | $80.00 | | $80.00 | | MIP | PMI ESCROW | | $88.46 | | $83.15 | | RE Tax & Proration | | $3,600.00 | | $3,600.00 | | FHA/VA Funding Fee (Financed) | | $1,688.75 | | $1,587.43 | | TOTAL PREPAIDS | | $6,421.43 | | $6,285.74 | | | | | | | | MONTHLY MORTGAGE PAYMENT | | | | | | | | | | | | MORTGAGE AMOUNT | | $98,188.75 | | $92,297.43 | | INTEREST RATE | | 6.000 % | | 6.000 % | | TERM | | 30 Years | | 30 Years | | | | | | | | Principal & Interest | | $588.69 | | $553.37 | | Homeowners Insurance | | $300.00 | | $300.00 | | Real Estate Taxes | | $40.00 | | $40.00 | | MIP/PMI | | $44.23 | | $41.58 | | Condo | Hm Assn Monthly Fee | | $0.00 | | $0.00 | | MONTHLY PAYMENT | | $972.92 | | $934.95 |
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