Randy,
In that case then no problem. Always glad to help.

Actually it helps Larry, its good to get feedback, and if anything it arms me with what questions I need to get definitive answers on from my Mortgage broker and Realtor.

Thanks,
I try to keep up with the lending guidelines but, as you stated the dust is far from settled and there are new things coming down the pipe everyday.

Randy,
sorry if we hijacked your question.

Larry, I wouldn't knock yourself.

There are so many changes in the industry over the past year or so that even the lenders' compliance officers are having trouble keeping up.

For example: Effective July 14, FHA introduced risk-based premiuims for calculating Mortage Insurance Premium (essentially higher scores pay less; lower scores pay more). On July 31, Congress passed the housing bill that put a one year moratorium on risk-based premiums. Heads are still spinning just on this one-two switch-a-maroo.

If you're not a lender, and you're keeping up with the major changes (like seller-funded DPA ban)... you're still doing very well.

I stand bloodied and bowed I guess that is also why I refer my clients to our mortgage reps and I do the real estate. I did actually ask and I guess I misunderstood her.

Lending answer:

Acceptable sources of down payment for FHA insured transactions:

1.) Borrower savings
2.) Gift from immediate family member
3.) Gift from non-profit charity (eg Catholic Charities of America)
4.) Government or community grant (eg Florida S.H.I.P or HUD American Dream)
5.) Cash proceeds from sale of prior home

Sellers are barred from giving down payment money to buyers for FHA now just as they have always been barred in conventional transactions.

In conventional transactions, "seller-funded down payment assistance" is known as mortgage fraud.

Larry, you are wrong again. There IS Downpayment Assistance still available after October 1st. This Assistance must come from any source that does not have a financial stake (the Seller) in the transaction. There are government grant programs all over the country with millions set aside for Downpayment Assistance.

Randy doesn't have to worry about it either way because he is asking for Closing cost help from his Seller and not downpayment assistance.

Randy sorry some misunderstood my answer. As I stated in the answer there is no downpayment assistance. Seller contributed closing costs are not considered downpayments. A seller can contribute up to 3% max for closing costs.

Hope this helps

Simplified answers from the lending side...

Regarding seller contributions to buyer's closing costs:

FHA/VA/US RDA: 6% of purchase price
Fannie/Freddie (ie Conventional):
3% if down payment is less than 10%
6% if down payment is 10% or more
3% max on non-owner occupied properties

Bruce's response below adds important info - buyers CANNOT receive cash from the transaction. Seller contributions to buyers' closing costs in excess of the actual closing costs are rebated back to the seller.

Randy,

Great questions, I agree completely with Bruce, each loan program determines the amount of seller credit you can use toward closing costs and pre-paid items...one thing that I have started to take advantage of in this market is maximizing the seller contributions with a permanent buy down. In the scenario stated by Bruce, if you have a 6% seller contribution and you use 3.5% for closing costs and pre-paids you are left with 2.5% which you can use to get below market rates. Rather than dropping the price by 2.5% and getting 3.5% in seller credit, maintain the price and take full advantage of the seller credit. To learn more about how to "Buy In This Market" send me a quick e-mail for a 3 minute video on this concept.

Hi Randy,

As other posters have stated, talk to your loan officer. The maximum seller credit allowed is dictated by the underwriting requirements of the *specific* loan program that you choose, so there is no single rule. For example, most conventional loans allow a maximum credit of 3%. An FHA loan, however, allows up to 6%. More importantly, your credit cannot exceed your actual closing expenses. As an example, let's say you negotiated a 6% credit from the seller and were getting an FHA loan which allowed 6%. If your closing costs only add up to 3.5% of the sales price, they wouldn't allow you to receive the additional 2.5%. The seller wouldn't be able to give this to you at closing.

My advice: speak to your lender and nail-down the particular loan program that's best for you. Then have him estimate your closing costs for your price range. This will give you a good ball park for your actual closing costs when you negotiate your purchase contract.

Good luck.

Randy: I have to agree with ChoiceRealEstate.net . . the only thing that maybe different now than before is that you have to specify, 3% for closings costs and 3% for downpayment assistance. The best way to get to the bottom of this, ASK YOUR LOAN OFFICER. He will know what type of contribution does the type of loan you are getting allows you to have. . .

Yes, you can still require the seller to contribute 6% closing help even AFTER October 1st. the only thing that changes is the Seller's contribution can't be used towards your down payment. As you said, you have the 3.5% to put down so you are good to go... Get your Closing Costs covered!

Larry, your response is incorrect, he is not looking for Down payment assistance from the seller.. Randy is looking for closing cost help from the Seller.

i don't need down payment assistance, i can put the minimum 3.5 % down for a FHA, i just want them to cover the closing costs, which they agreed to cover 6%. Do i have to close before october 1st for this to happen?

Randy,
Unfortunately for now they are correct. With the new law that was just passed all the dpa's (downpayment assistance) have gone. The only down payment assistance a buyer can have is from family. Now there is a bill being pushed through the legislature that will bring them back but for now we do not have a choice. September 30th is that last day. Some lenders will not allow them if the contract was not effective after August 31st.

Sorry hope this helps,