How much can seller pay for closing cost?
I’ve got a question. I recently purchased a home and
initially I was going to ask that the seller pay all my closing cost
and try to haggle from there. But my mortgage broker told me that the
maximum amount the seller could pay is 3% for an owner occupant and 2%
for an investment property? Is this true??, or was it solely the
requirement of the loan provider? It was news to me, if anyone can
shed some light on the subject I would appreciate it.
ANSWER
I have seen sellers pay 6%. Your lender is limiting how much your seller can contribute. Various loans require the buyer to make specific contributions, and they sometime even make a buyer document where their down payment and/or closing costs funds are coming from, to ensure it’s not someone else’s money.
I have no idea why lenders do some of the kooky things that they do. I’m sure they are trying to avoid fraud, but much of it does not make sense.
Anyway, in most cases when a broker tells you something that does not sound right, it’s time to shop around for another broker so you can see if a better product/solution is available. It was not appropriate for you broker to imply that it’s not possible for a seller to contribute more, for example. Just about anything is possible…
For example, you can always explore supplementary transactions that take place outside of closing. This could be as simple as asking the seller to throw in furniture, appliances, or other improvements, or even asking for art, furniture, or automobiles. I have seen all of these negotiated through various creative deals. The only caution I will offer is that transactions outside of closing do not involve the lenders, realtors, or title companies, and are not insured with your title policy. Also, if you are getting a loan, the loan may stipulate that there are no other aspects to the transaction, and your contract may stipulate that it documents the deal in it’s entirety. In other words, you have to make sure you have some way to make sure the deal outside of closing is honored, legal, and possibly reversible if the sale is reversed or does not take place.
Phill
