Seller Covering Closing costs

Does this happen? Can you have a seller cover the closing costs? Can you roll closing costs into a mortgage?

Re: Seller Covering Closing costs

We live in FL so i'm not sure how different it is in NY but when we bought our house 4 years ago we got 3% closing costs paid by the seller (the bank).

We are now selling and looking for a new house I asked my realtor if asking for closing costs when making an offer is something we could still do and he said although it's not done nearly as much anymore we could still ask for it and see what happens.

Being a seller now I can tell you that usually they have a bottom line of what they want to sell for. So if you make a solid offer (no low ball offer or anything) and ask for closing costs as long as the seller is getting what they want it could work. Ex: a house is for sale for $250k, they want $225 minimum, if you offer $235 with $10 back in closing costs they are still getting their $225 total. JMO i'm not a realtor or anything..

Re: Seller Covering Closing costs

On Long Island, sellers typically don't cover buyer's closing costs, or contribute to them. The rare exception is if the seller is offering some kind of buyer incentive to get a quick sale (e.g., a seller may say that they will pay $5000 toward the buyer's closing costs). But those types of incentives really aren't common in our local market.

So buyers either need to come up with their own closing costs or get a seller's concession, which really means that the buyer rolls the closing costs into their mortgage loan.

With an FHA loan, the maximum for a seller's concession is 6% of the purchase price. With a conventional loan, it depends on how much you are putting down. I believe the rules are you can get up to 6% if you are putting more than 10% down; otherwise, you can only get up to 3% (but a mortgage professional can verify this).

When you get a seller's concession, it increases the purchase price of the house, so the house must appraise for the full price (what you are paying the seller + the closing costs), and your down payment is also based on that higher number.

So let's say you are getting an FHA loan and need the full 6%. If the seller agrees to take $300K for his home, the purchase price in the contract will be $318K, and the house has to appraise for $318K. If you are putting 3.5% down, it's 3.5% of $318K, not $300K.

Let me know if you have other questions!

Re: Seller Covering Closing costs

We did a seller's concession as PP.