Closing Costs (sale, 2009, credit)

[gmchusyr]

Hello all, I am looking at buying a townhome in Montgomery County (new development). One thing I noticed is that some sellers will pay all closing costs while others will only pay up to $10,000. Is there a reason for this $10,000 cap? Are closing costs negotiable? Any info is appreciated. Thank you.

[TeamBenya]

Originally Posted by gmchusyr

Hello all, I am looking at buying a townhome in Montgomery County (new development). One thing I noticed is that some sellers will pay all closing costs while others will only pay up to $10,000. Is there a reason for this $10,000 cap? Are closing costs negotiable? Any info is appreciated. Thank you.

Everything is negotiable, but that doesn't mean the seller will necessarily offer more closing. The amount of closing assistance you can receive is also limited depending on what sort of loan program you are using. For FHA loans, the max is usually 3%. under the old nehemiah/ameridream programs that number was 6%, but as lending requirements change, so do closing cost allowances. If you're looking at resale homes that are offering "up to $10k", that is common verbage used to try and entice a buyer into making an offer. My experience in this market has been that it is very rare to see a home purchased WITHOUT closing help paid by the seller.

[charlessr]

it really depends on the definition of closing costs.....points or origination fees are always negotiable if you are willing to take a higher interest rate....however...State and County recording fees are not.....but that is what the closing cost credit supposedly covers...be careful of having to pay a higher interest rate to use the builder's lender in order to receive the closing costs credit..

[gmchusyr]

thanks for the tips. I forgot to add that this would be a FHA loan. so the max the seller can pay towards my closing is 3%? if that is true, then $10,000 is close to the max they would be able to pay.

[TeamBenya]

Alright, let me see if I can better explain FHA terms in the present day. As of 1/1/2009 (the rules just changed!), in order to purchase a home through an FHA program, you need to be investing a minimum of 3.5% (formerly 3%) of your own money.

1.) FHA insured loans do not impose any extra costs or fees on the seller. The only possible exception would be repairs needed to ensure the house meets FHA standards FHA is much less stringent now than in the past.

2.) The maximum amount the seller may contribute to the buyer's closing costs is 6% of the purchase price. The seller may NOT contribute to the buyer's statutory down payment of 3.00%(3.5% as of January 1 2009) (seller-funded Down Payment Assistance companies are now barred from FHA insured loans effective Oct 1, 2008).

3.) If the buyer's closing costs are less than the 6% maximum, the seller retains the difference.

4.) If the buyer's closing costs exceed 6% of the purchase price, the buyer must bring that amount plus the 3.00% down payment to the closing and have at least $100 in reserve after closing.

[lscalder]

The seller can pay up to 6% of your closing cost now the seller can also pay for your taxes as well.
So if your sale price is $300,000 the seller can pay up to $18,000. You can also have the seller pay for your State Transfer tax,Recording/city/county tax which usually adds up to 3k or more.

[davidmil]

In this market, everything is negotiable. I sold a home in Maryland in the fall of 07. We didn't call it closing cost. I gave back $25,000 at settlement. He could have used it to buy a new car if he wanted. He did in fact use it for settlement. People will do what they have to do.

[lscalder]

You have to put down the 3.5% no way around that but everything else can be paid by the seller.

[AlicynD]

In the end it's all negotiable and it's what the Seller is willing to accept in regards to the proximity to their "bottom line"; as long as you are within your lender's requirements.