Seller Contributions- Getting Into Your Home for Less
What are Seller Contributions?
Seller contributions aka seller concessions or interested party contributions are funds provided by the seller at the time of closing to help the buyer pay for their closing costs. Seller contributions are a great way for a home buyer to get into the home for less money! The maximum amount of seller contributions depends on the loan program you are using to finance your mortgage.
For conventional loans if we are putting less than 10% down the maximum amount you can ask for in seller contributions is 3%. That 3% is based off of the purchase price of the house not the loan amount. For example if we are purchasing a home at $200,000 and putting 3% down we could ask for a maximum of $6,000 in closing cost help. (See Example Below) If we are putting 10-20% down we can ask for 6% seller contribution towards closing cost and if we are putting 25% or more down we can ask for 9% of seller contributions. This applies for both primary and secondary homes. If we are purchasing an investment property then 2% of the purchase price is the maximum amount we can ask for closing cost help.
Seller Contributions Example: Conventional Loan
Purchase Price: $200,000
Down Payment $6,000 (3%)
Maximum Seller Contributions: $6,000
In this example the Seller Contribution is enough to cover all of the down payment for your loan!
Seller Contributions for USDA and FHA Loans
For both USDA and FHA loans the limit is set at 6% of the purchase price for seller contributions. If you are moving to the Eastern Shore you are eligible for a USDA loan. A USDA doesn’t require a down payment. If you are using USDA financing to purchase a home then seller contributions can help pay for most of your closing costs resulting in you getting into your dream home for very little money out of your pocket!
With FHA loans it is important to note that the seller contributions cannot cut into your down payment. Meaning no matter how much seller contributions we receive, we are going to have to make at least a 3.5% hard down payment and the seller help towards closing costs cannot contribute to the down payment.
Getting Into Your Home for Less
Seller contributions are another reason why it is super important for you to have a buyer’s agent so they can help you negotiate the seller contributions for you. Whether you are a first time home buyer or someone looking to purchase a vacation home, seller contributions are a great way to get into your dream home for less!
NMLS ID 1558861