Allowable Seller Paid Closing Costs

Most Mortgage Loans that I do these days have Seller Paid Closing Cost, this is true even on a purchase where the Buyer has significant assets.  As a result of this, a common question that I am asked all the time from Buyers and Realtors, is how much can they ask the Seller to contribute towards Closing Costs?

Given that I am asked this question almost daily I thought that it maybe useful to provide that information for what seems to be the four major Mortgage Loan Programs these days.  I have provided below a chart that I put together that I believe provides this information in a simple and clear format.

 

NOTE: 

FHA does not allow for Sellers to pay Closing Costs that are paid before the Closing.  For Example many Lenders will collect for the Appraisal Fee, and Application Fee at the time of application, the Buyer cannot be reimbursed these fees later at the Closing by the Seller.  Also Homeowners Insurance if paid by the Buyer before the Closing cannot be reimbursed later at the Closing by the Seller.  These are just a couple of example, but this FHA guideline applies to all fees or expenditures that are paid by the Buyer before the Closing.

The way that a Buyer is able to be reimbursed for fees and expenses that are paid before the Closing, is if they are  doing a Downpayment and Closing Cost Assistance Loan (DAP).  In this case FHA will allow the Buyer to role those fees and expenses into the DAP Loan, and be reimbursed the funds at the Closing.

 

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 Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.coml