Many first time buyers (and move up buyers too) negotiate for the seller to pay some or all of their closing costsClosing costs are the fees and charges due at closing beyond the down payment itself — the collection of costs that pay for all the work, insurance, and government processes required to originate a loan and transfer (or refinance) a property. They... More. This is a great strategy to reduce the total amount of cash needed to purchase a home. All loan programs allow the seller to pay some or all of a buyer’s closing costsClosing costs are the fees and charges due at closing beyond the down payment itself — the collection of costs that pay for all the work, insurance, and government processes required to originate a loan and transfer (or refinance) a property. They... More (and other prepaid expenses). But how do you determine exactly how much the seller can pay? Although some programs state the seller can pay up to 6% of the sales price toward closingClosing is the meeting — typically in person — where all parties sign the final loan and property paperwork and the transaction becomes official. It’s the last step in the process, the point where months of paperwork, verification, and waiting turn into... More, it is really rare that the closing costsClosing costs are the fees and charges due at closing beyond the down payment itself — the collection of costs that pay for all the work, insurance, and government processes required to originate a loan and transfer (or refinance) a property. They... More actually add up to that much. I find 4% is more typical.
FHA allows the seller to pay all closing costsClosing costs are the fees and charges due at closing beyond the down payment itself — the collection of costs that pay for all the work, insurance, and government processes required to originate a loan and transfer (or refinance) a property. They... More and prepaid expenses but also there is a strict requirement to have a minimum of 3.5% into the transaction (excluding the upfront cost of the home inspection and appraisalAn appraisal is an independent, professional opinion of a property's value. It is completed by a licensed appraiser who examines the home, studies recent sales in the area, and applies established valuation methods to determine what the property is worth in the... More).
Rural Development (RD) and VA allow the seller to pay everything!
Conventional programs with 3% or 5% down restrict what the seller can pay to 3% of the sales price.
What’s the best way to figure all of this out? Have your loan officer do a worksheet to show you what the specific costs will be for a particular home purchase. Or use one of our DIY worksheets! Reduce your cash outlay by having the seller pay closing costsClosing costs are the fees and charges due at closing beyond the down payment itself — the collection of costs that pay for all the work, insurance, and government processes required to originate a loan and transfer (or refinance) a property. They... More!