Wednesday, October 29, 2008

Seller Concession Limits

On most loans these days, the seller pays part of the buyer's closing costs, so it's important to know what the limits are. Here are the Fannie Mae limits for seller concessions (the amount the seller can pay towards the buyer's closing costs):

-- 2% of the sales price for an investment property.

-- 3% for a primary residence or a second home, if the buyer has less than 10% as a down payment.

-- 6% for a primary residence or a second home if the buyer has between 10% and 24.99% as a down payment.

-- 9% for a primary residence or a second home if the buyer has 25% or more as a down payment.

For FHA loans, the limit for seller concessions is 6% of the purchase price, regardless of the down payment.

For VA loans, there is no limit on the amount that the seller can pay towards the buyer's closing costs. However, some of the fees that are typically thought of as being "closing costs", such as the money used to set up the buyer's property tax and homeowners insurance escrow account, have a limit of 4%. In almost all cases, the seller is allowed to pay all of the buyer's fees.

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