Home Buying in Jamaica Plain>Question Details

Homebuyer123, Home Buyer in Jamaica Plain, MA

Can prepaid amounts covered by the seller at closing be credited to the borrower as earnest money on a HUD settlement statement?

Asked by Homebuyer123, Jamaica Plain, MA Sat May 1, 2010

I had an agreement where the seller covered closing cost up to $7,000. This was used to cover prepaid items including insurance for $1,000. The bank would not credit these amounts as additional earnest money to me at the closing even though I paid for these and the seller was now sourcing them during the closing. Instead they reduced the loan amount and required the balance of the downpayment at closing. The effect is a larger downpayment than originally agreed. Is there a valid reason prepaid items sourced by the seller at the closing are not allowed to be credited to the borrower as earnest money?

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No I believe it cannot be for earnest money which is why they changed the numbers.
Web Reference: http://www.mdmrealtyinc.com
0 votes Thank Flag Link Mon May 3, 2010
The annual insurance premium is an allowable cost to be paid by the seller. However you also have to make a minimum investment of your own funds. You may have misunderstood why the lender had to reduce the loan amount. Or your loan officer didn't understand why the underwriter was reducing the loan amount and made up an answer that sounded feasible.
0 votes Thank Flag Link Sat May 1, 2010
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