Seller-Paid Closing Costs - How Much is Allowed?

Here's what you need to know about seller-paid closing costs.

What are seller-paid closing costs?

• The seller is allowed to pay a certain percentage of the sales price towards the buyer's closing costs
• The amount depends on three things:
  • The type of loan: conventional, FHA, or VA
  • The occupancy type: principal residence, second home, or investment property
  • The amount of the down payment

How much can the seller pay?

Conventional (non-government) loans

• Principal residence or second home
  • 3% if the down payment is less than 10%
  • 6% if the down payment is 10% or greater, but less than 25%
  • 9% if the down payment is 25% or greater
• Investment property
  • 2%, regardless of the size of the down payment

FHA loans (primary residences only)

• 6%, regardless of the size of the down payment

VA loans (primary residences only)

• 4% for seller concessions
  • VA funding fee
  • Tax and insurance escrows
  • Excessive discount points
• Unlimited for all other closing costs

What about the sales contract?

• The amount of seller-paid closing costs that is in the sales contract DOES NOT have any effect on the allowable amount.
• If the contract says the seller will pay 4% towards the buyer's closing costs, but the limitation is 3%, then the amount in the contract DOES NOT matter. 3% is the max.
• Check with the lender before writing the contract!

Can anyone else pay?

• Yes. The real estate agents can pay the buyer's closing costs. The same limitations apply.
• The lender can pay the buyer's closing costs. The amount the lender can pay is unlimited.

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Want to make sure your Colorado loan closes? Call the Mortgage Experts at 303-345-3683.