Seller credits, aka seller paid closing costs, are just that. You can use them for all your closing costs and your "pre-paids" which include your homeowners insurance, your taxes, any HOA transfer payments and monthly payments. Sometimes the seller credit exceeds the normal closing costs. If you run into this situation, get with your lender on this & they should be able to determine if you have enough to buy down your interest rate or if that is not the case, you can use the excess funds to prepay your HOA fees or property taxes.
Your seller credits cannot be used to increase your down payment. If you are using Conventional or FHA financing with an upfront mortgage insurance premium (UMIP), you can use a portion of the seller credits to pay down the MIP, or if you are using VA or USDA financing, you should be able to pay down their funding fee.
I hope that helps you with your dilemma. Please feel free to contact me if you have any further questions, I'd be glad to help.
All the best,
Roswell Moore, CMPS
Certified Mortgage Planner
We are a Direct Lender, Mortgage Bank where we originate, process, underwrite, fund, AND SERVICE our loans, in-house, with FHA (starting at a 580 score AND still only 3.5% down), FHA Streamline loans (no minimum credit score, no appraisal required) Go Green rehab loans, HomePath, Investor Friendly (10 financed properties), VA, USDA, Jumbo, Conventional, plus, we allow Escrow HoldBacks!