Want to know Seller's contribution on 30-year conventional loan. Seller says 3% for a 5% downpayment

Asked by Falcyon123, Riverdale, GA Sat Oct 10, 2009

My builder (DR Horton) on a newly constructed property in Johns Creek GA for a 5 % downpayment is specifying that seller can only contribute upto 3 % at closing for a 30-yr conventional loan. Is this correct ? If I increase the downpayment to say 10%, will sellers contribution towards closing be a higher percent ?

TIA
Shon

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kevin.ramirez, , Atlanta, GA
Sun Oct 11, 2009
BEST ANSWER
For a 90% CONVENTIONAL LOAN THE SEKKER CAN PAY 6%.
fha 96.5% LOAN THE SELLER CAN PAY 6%.
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Kevin
0 votes
, ,
Sun Oct 11, 2009
Yes and maybe. Yes, it is 3% for 5% down. Maybe, the seller can pay 6% with 10% down if the seller has room to do so. Back in the day, we could increase the sales price to cover more of the closing costs. However, with the values the way they are here in Alpharetta/John's Creek, there may not be any room left to do so. I would also see if your loan officer could bump your rate up a little and offer a lower closing cost loan so that you don't have to sink more money into down payment. Another option would be to do an 80/15/5 loan to avoid mortgage insurance. The company I use, for example, on the second mortgage, charges zero fees, so, your closing costs will be less due to the first mortgage being lower (some fees are based on the loan amount). Your payment may also be lower.
2 votes
Stephanie Mc…, Agent, Canton, GA
Thu Nov 12, 2009
You really need a buyer agent when dealing with a subdivision agent or builder. I have NEVER encountered a homeowner who purchased alone in a new subdivision who did not have regrets. You will be at a disadvantage every step of the way. You are probably thinking, "it's new construction, how difficult could it be?"

If the contract is not signed, find a good buyer agent in your area and you will be glad you did so.
Web Reference:  http://www.mysouthhomes.com
0 votes
Derrick, , 60422
Sat Oct 10, 2009
A seller contribution is when the seller of a home puts up some or all of the money needed toward
the buyer’s closing costs. Seller contributions can be negotiated at the time of a home purchase
by having the seller pay closing costs rather than a reduction of the home sales price.

Sometimes you can do a combination of both.

A lot of people are creditworthy of having a mortgage but they just don’t have a lot of money in
the bank. In these cases, seller contributions can mean the difference between a sale and no
sale.

A Seller contribution is very easy to do. You simply disclose it to the lender. In most cases,
these contributions range from 3%-6% of the purchase price. Some 100% financing programs
now allow seller contributions up to 6%. It used to be capped at 3%.

Ever wonder how the homebuilder offers to make the buyer’s payment for a year? They use the
seller contribution to make these payments out of escrow. If you buy a $300,000 home and the
builder is allowed a 3% contribution or $9,000 and your payment is $1,500 per month, there are
your six months in payments.

Sometimes seller-contributed closing costs can help the borrower get a better interest rate by
buying it down, making the home easier to qualify for.

Ever wonder how a homebuilder can offer 4.750% interest rates when the market is at 6.000%?

They use seller contributions to buy down rate. Figure that every .250% of rate buy-down costs
1% in points or a loan discount fee. If the rate today is 6.000% and you want to buy it down to
4.750% that would cost 5 points in discount fees. You still have 1% left over for closing costs.

Are you offering these marketing possibilities to your clients? You need to get with your preferred
lender to find out how you, too, can compete with the builders. Don’t just use seller contributions
to cover closing costs. You too can offer a home with a rate in the high 4.000’s%.

Here is the catch: The amount of seller contribution cannot exceed the actual amount of closing
costs and it CAN NEVER be given back as a cash incentive to the buyer.
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