3 Thoughts on Is there a percentage that you can not go over when asking for closing cost?
  1. Reply
    July 20, 2011 at 12:13 am

    Conventional Loans
    On a conventional loan, the seller can only pay non-recurring costs. These do not include pre-paid items or items to be paid in advance (such as mortgage insurance or hazard insurance). The seller’s contribution is limited to the amount the buyer is putting down. If the buyer puts 10 percent or more down, the seller may contribute up to 6 percent. If the buyer puts less than 10 percent, the most the seller may contribute is 3 percent.

    VA Loans
    On a VA loan, the seller may pay all the closing costs

    FHA Loans
    On a FHA loan, the seller may pay all the closing costs. However, the buyer must make a minimum 3 percent investment in the property – whether as part of the closing costs, a down payment or pre-paid items.

    Hope this helps.

  2. Reply
    July 20, 2011 at 12:51 am

    You can ask for anything you want. Your problem may be with the mortgage program you are in. Depending on what kind of mortgage you applied for, the lender may limit “seller contributions” to 3% which is all that can show up on the settlement statement at closing. The way to get more is to negotiate a lower selling price. It depends on how desperate the seller is to get the deal done.

  3. Reply
    July 20, 2011 at 12:57 am

    I presume that you are asking the seller to make a sales concession, which will help you defray some or all of your “closing costs & prepaid expenses”. Different loan program guidelines do dictate what the maximum concession can be. Another pertinent piece of the puzzle depends on the amount of “down payment” you are coming up with. Under the guidelines of a 5% down conforming conventional loan typically the maximum concession is 3% however with a greater downpayment the seller can concede up to 6% of the sales price. FHA & VA also are more liberal as far as concession is concerned. There are different 100% financing programs for 1st time homebuyers that meet certain income or job guidelines that are part of the conforming loan market, and these programs will typically allow up to a 6% concession. My best advice would be to not depend on your realtor for financial advice and to seek information from a reputable local lender or nationwide mortgage company that offer conventional and FHA/VA programs.
    There is another “program” that can also help reduce your out of pocket costs that is known as a “downpayment assistance program” – it can typically be used with FHA financing and offers a terrific means of minimizing your costs. If you are buying in the near future, inquire with your lender as to the availability of this type of program, as unfortunately due to pending legislation it might soon “disappear from the landscape”. To explore this option “Google” “Ameridream”, or “Nehemiah”. Good-luck becoming a “home owner”!

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