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What is the maximum amount of Seller Concessions?

March 26, 2024

 

Maximum seller concessions

Maximum Seller Concessions:

  • Seller concessions are the amount of closing costs, property taxes, and insurance paid by the seller when a home is sold.
  • The maximum seller concessions allowable when a home buyer is getting a mortgage determine the limit of assistance the seller can provide.

Importance of Seller Concessions:

  • Seller concessions can help buyers with upfront costs and make the purchase of a home more feasible.
  • Understanding the limits on seller concessions is crucial for both buyers and sellers in a real estate transaction.

Types of Seller Concessions:

  • Common types of seller concessions include the seller paying for the buyer's closing costs, pre-paid interest, and property taxes.
  • Negotiating seller concessions can be an important aspect of the home buying process.

Seller Concessions Limitations:

  • The limit on seller concessions can vary depending on the type of mortgage and the buyer's down payment.
  • Buyers should be aware of these limitations when negotiating a real estate transaction.

Maximum Seller Concessions

Effect on Mortgage Terms:

  • Excessive seller concessions can affect the terms of the buyer's mortgage and may lead to complications in the loan approval process.
  • Both buyers and sellers should carefully consider the impact of concessions on the overall transaction.

Regulations and Guidance:

  • Regulations and guidance from government agencies such as the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA) provide specific rules on seller concessions.
  • Compliance with these regulations is essential for a successful and legally sound real estate transaction.

Professional Consultation:

  • Seeking advice from a qualified real estate agent or mortgage professional can help both buyers and sellers understand the implications of seller concessions.
  • Professional guidance can ensure that seller concessions are utilized effectively and in accordance with applicable regulations.

Seller concessions, also known as Interested Party Contributions (IPCs), can be used for:

Maximum Seller Concessions

  1. **Payments or credits related to acquiring the property**, such as:

- Origination fees

- Discount points

- Commitment fees

- Appraisal costs

- Transfer taxes

- Stamps

- Attorneys’ fees

- Survey charges

- Title insurance premiums or charges

- Real estate tax service fees

- Funds to subsidize a temporary or permanent interest rate buydown

- Prepaid items like interest charges, real estate taxes, property insurance premiums, homeowners’ association (HOA) assessments, initial and/or renewal mortgage insurance premiums, and escrow accruals for mortgage insurance coverage

 

  1. **Typical fees and/or closing costs paid by a seller in accordance with local custom**, known as common and customary fees or costs, which are not subject to Fannie Mae IPC limits.

Maximum seller concessions

Seller concessions cannot be used for:

 

  1. Making the borrower’s down payment
  2. Meeting financial reserve requirements
  3. Meeting minimum borrower contribution requirements

 

Additionally, any concessions that exceed Fannie Mae IPC limits are considered sales concessions and must be deducted from the sales price when calculating Loan-to-Value (LTV) and Combined Loan-to-Value (CLTV) ratios for underwriting and eligibility purposes.

 

Source: Guidelines context provided, specifically the sections "Financing concessions" and "IPC Limits" under "Lender Checklist for IPCs".

 

Christopher Gibson

Christopher Gibson

NMLS #1910430 | C2 Financial Corp NMLS #135622

Call me: 720-449-6622

Email me: C@ChrisRayGibson.com

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Christopher Gibson
Explore the intricacies of the mortgage market with our latest insights at Reverse Mortgages & Home Loans with Christopher Gibson at C2 Financial. This comprehensive blog dives into up-to-date real estate market statistics, offering a clear picture of current trends and forecasts. Gain an in-depth understanding of reverse mortgages, demystifying this option for homeowners. Additionally, the blog provides detailed information on traditional conforming loans, including government-backed options like FHA, VA, and USDA loans, explaining their benefits and application processes. This is an essential read for anyone looking to navigate the complexities of home loans and real estate investments.
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Explore the intricacies of the mortgage market with our latest insights at Reverse Mortgages & Home Loans with Christopher Gibson at C2 Financial. This comprehensive blog dives into up-to-date real es...
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