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by Peter G. Miller
January 5th, 2011

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This entry was posted on Wednesday, January 5th, 2011 at 12:40 am and is filed under . You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

4 Responses to “FHA’s “seller contribution” rule in limbo”

  1. John Says:

    buyer cannot get cash back at closing so they don’t get a 18K credit. If closing cost and prepaids do not add up to 18K then the seller will not have to pay that much. The 6% concessions is really needed on smaller loan amounts, b/c most of the people purchasing in the 30-50K range don’t have 3K for closing costs and prepaids…

  2. Peter G. Miller Says:

    Hi –

    They can get an $18,000 credit if the closing costs and prepaids add up to that amount. Thus the quote from HUD: “Contributions exceeding six percent of the sales price or exceeding the actual cost of prepaid expenses, discounts points, and other financing concessions as well as other inducements to purchase, result in a dollar-for-dollar reduction to the sales price before applying the appropriate LTV ratio.”

    I agree that in most cases sale amounts are not sufficient to generate $18,000 in approved expenses.

  3. EJohnson Says:

    If the buyer has already paid some of the closing costs in advance (such as loan app fee, appraisal, inspection, etc) and has a seller contribution amount specified in the purchase contract, how is the buyer reimbursed at closing?

  4. BarbaraQ Says:

    “If closing cost and prepaids do not add up to 18K then the seller will not have to pay that much.”

    Approved Expenses or allowable closing costs would include discount points that can be used toward a permanent or temporary interest rate Buydown… this will help the Buyer reach the $18,000 mark.
    True?

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