FHA may limit seller-paid closing costs

Homebuyers seeking a mortgage insured by the Federal Housing Administration (FHA) currently are allowed a 6% seller concession. A seller concession is a term for that refers to cash assistance the seller offers a buyer at closing. This is based on the sale price of the property.

This cash assistance is allowed to be used towards the buyer's closing cost. Some closing costs include loan origination, title search, title insurance, appraisal, inspection, recording, transfer and closing or attorney's fees, plus credit reports and flood certifications. The buyer's down payment isn't a closing cost.

FHA's proposed change will limit the seller concession to just 3% of the purchase price. The reason for the change is FHA feels that the 6% concession could inflate the appraisal price and exposes the agency to more risk. FHA feels that a buyer should have more invested in their home purchase. Most buyers will not be affected by the rule change because closing costs typically do not exceed 3%.

If a home buyer needs assistance here are some programs available:

  • Cash assistance from a community homebuyer program. Known as Mortgage Finance Authority (MFA). Allows for 100% financing and closing cost assistance.
  • A loan that allows lender-paid closing costs with a higher interest rate.
  • A loan from Fannie Mae that allows 100 percent financing to purchase a Fannie Mae-owned home or a similar program through the U.S. Department of Veterans Affairs.

For more information call Carlos Martinez 505-350-8184

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