I’m buying a home. Can the seller pay my closing costs?
It’s possible to ask the seller to pay all or part of your closing costs, prepaids, and tax/insurance escrows. If you are making an offer on a home it is very important to include specific amounts and clear language in the contract upfront. The amount that the seller is allowed to pay when a buyer is getting financing will vary depending on the type of loan, the loan to value, down payment, and the occupancy (owner occupied or investor).
Here is an overview of what the seller is allowed to pay for the buyer’s closing costs and prepaids/escrows:
FHA loans-up to 6% of the sales price (owner occupied only)
VA loans-up to 4% of the sales price (owner occupied only)
Conventional loans-depends on the down payment and occupancy:
Owner occupied with 5%-9.99% down payment = 3% of the sales price
Owner occupied with 10% or more down payment = 6% of the sales price
Investor loans-2% of the sales price regardless of down payment
To avoid any misunderstandings at closing we recommend the financing addendum be written as follows:
“Seller to pay X dollars towards buyers closing costs, prepaids and escrows” or “Seller to pay up to X percent of the sales price towards buyers closing costs, prepaids, and escrows”.
Please call us if you need assistance when asking for seller contributions before signing a contract. We will provide you the estimated total costs so you ask for the appropriate amount. You may want to consult with your attorney for additional professional advice before signing a contract.