What is seller paid closing cost when buying or selling a home?
Closing costs are one of the most confusing and misunderstood parts of the home buying journey. Most first time home buyers are “not” aware of closing cost. This can be a problem for buyers who jump into the homebuying process without budgeting for these costs and fees, which can total 2% to 5% of the purchase price on top of down payment. The good news is Buyer may not have to spend a dime. Buyer can ask the home seller to cover some or all of buyer’s closing costs. Here are list of typical What is seller paid closing cost.
What Closing Costs Can the Seller Pay?
Many buyers (particularly first-time buyers) are short the cash they need for the down payment and closing costs. One way to overcome this cash shortage is for the seller to pay a portion of the closing costs. How much the seller is allowed to contribute depends on the type of mortgage loan.
Also Read: Closing Cost Who Pays What in Phoenix Arizona
Conventional Loans
On a conventional loan, the seller can only pay non-recurring costs. These do not include pre-paid items or items to be paid in advance (such as mortgage insurance or hazard insurance). The seller’s contribution is limited to the amount the buyer is putting down. If the buyer puts 10 percent or more down, the seller may contribute up to 6 percent. If the buyer puts less than 10 percent, the most the seller may contribute is 3 percent.
Suggested: What is Closing Cost when buying a home?
VA Loans
On a VA loan, the seller may pay all the closing costs (this is known as a “VA-No-No” – the buyer pays no down payment and no closing costs). Sellers who agree to pay the closing costs often put a ceiling on the amount they will pay.
FHA Loans
On a FHA loan, the seller may pay all the closing costs. However, the buyer must make a minimum 3 percent investment in the property – whether as part of the closing costs, a down payment or pre-paid items. The 3 percent can be from the buyer’s own funds or from a family member’s gift.
Suggested: Buying a House with FHA Loan in Phoenix AZ
Asking the Seller to Pay a Portion or All of Closing Costs
The seller’s willingness to contribute to closing costs is often driven by market conditions and the way in which the request is made to the seller.
As your real estate agent, I will help you prepare an offer that balances the purchase price and request for closing cost assistance with the dynamics of the current marketplace. For instance, in a seller’s market we may increase the offered purchase price to offset the request for closing cost assistance.
Remember – When you ask the buyer to pay a portion or all of your closing costs, in essence you are financing the closing costs. This is because the seller’s contribution is typically offset by a higher purchase price. And it is this higher purchase price that is financed with your mortgage loan.
Selling your home in Phoenix AZ
Contact Us or call Swee Ng at 480.721.6253 today to discuss your potential Phoenix AZ Home Price and our comprehensive marketing plan. We will prepare complimentary competitive market analysis (CMA) to find out what your home is worth at today’s market.
New Listing in Last 24 hour Phoenix AZ
Contact Us about Selling Your Home
Search homes for sale in your neighborhood
You can now be alerted as soon as a Phoenix property matching your criteria hits the market. Be one of the first to see new listings. Simply type in everything you want in a house and save your search here to be notified.
