This may be a new concept for you but it is one that can easily be grasped and it goes like this: Typically, a home buyer must pay for certain costs to complete the transaction, however, an agreement can be made between the buyer and seller where the seller pays for those costs on the behalf of the buyer. These costs are paid when you close your mortgage via a credit on your settlement statement from the seller (hence, they are referred to as "closing costs") and can include, but are not limited to:

 

• Appraisal Fee

• Title Insurance

• Property taxes covering any period after the closing date

• Origination Fee

• Discount Points (1 point = 1% of the loan amount)

• Credit Report Fee

• Attorney's Fee

• Inspection Fee

• Processing Fee

• Odd Days Interest & Hazard Insurance Premiums (often referred to as "prepaids")

• Transfer Taxes

• Homeowner Association Dues

 

The amount of the costs incurred will vary by location and depend upon what needs to be done. i.e. some states require an attorney to review the loan documents and conduct the loan closing, others do not.

 

Sounds nice, doesn't it...having a seller to pay you to buy their home?  Why would anyone do this, you ask? Actually, there are huge advantages for both buyer and seller. For the buyer, these concessions will reduce the financial burden of buying a home because many of these transactions have little-to-no money out of pocket at closing. There are also tax advantages--you may be able to deduct some of the fees charged from your taxes.* For the seller, it can be a great way to sell a home quickly, especially when they're trying to close on a new home purchase themselves.

 

As with all good things, there are limitations to how much a seller may concede and the amount varies from three to nine percent of the purchase price. The specific amount depends on the kind of mortgage the buyer qualifies for, whether or not it is owner-occupied, and the amount of money being put down by the buyer. If you want to know how much the seller can contribute towards your closing, just ask...but chances are good I have already told you about it if we have talked on the phone!

 

Buying a home will most likely be the biggest investment you ever make and using seller concessions are great way to make the initial outlay of that investment less expensive; if you want to know more about this, please let me know as I would be happy to guide you in the right direction.

 

*As always, consult your tax advisor to be sure this applies to your situation.