FHA Mortgage/Seller Concession (sales, loan, house)

[aggie354]

I am purchasing a home for $252,000, my loan amount will be $245,000 and my lender requires a $7000 seller concession for closing costs. Is the $7000 built into my loan amount of $245?

Thanks

[Mightyqueen801]

I am interested in finding out the answer to this, as I am beginning house hunting. Your purchase price is in my range. Would you mind saying where? Town, or county. If not, I understand.

[nemmert]

If I'm reading right... you made an offer of $252k on a home with the concession the owner would gift you back $7000?

If that's correct, your mortgage will be for $252k. Basically you do this to vastly reduce the amount of cash you need to cover at closing costs by building that money into your mortgage... you pay an extra $50 every month on your mortgage but didn't need $7 grand at closing and your down payment only goes up a few dollars (3.5% of $7,000 is only $245).

It's generally a pretty good idea, especially with how low interest rates are right now. I know back in 2004 we actually got into a house with no money out of pocket... 0 down payment and $10,000 back from the sellers to cover closing cost... the home still appraised for $30k more than the mortgage amount... I think those days are over!

[icibiu]

We are having the seller "cover" our closing costs which should be around $8K. When we put our offer together we decided what we wanted to offer and then added $8K for closing costs. When we were negotiating the sale price we spoke in terms of "net to the seller" and then just tacked the 8k back on. The only problem you may run into is if the house does not appraise for your offer + closing costs, the money for your close is what is going to be reduced since the seller will probably not be willing to come down on their profit at that point. Also we have to pay the title transfer fees for that portion of the sales price (usually the seller pays this but your closing costs are not part of the sellers profit) I believe ours are supposed to be $45, no big deal. Good luck!

[nemmert]

Originally Posted by icibiu

We are having the seller "cover" our closing costs which should be around $8K. When we put our offer together we decided what we wanted to offer and then added $8K for closing costs. When we were negotiating the sale price we spoke in terms of "net to the seller" and then just tacked the 8k back on. The only problem you may run into is if the house does not appraise for your offer + closing costs, the money for your close is what is going to be reduced since the seller will probably not be willing to come down on their profit at that point. Also we have to pay the title transfer fees for that portion of the sales price (usually the seller pays this but your closing costs are not part of the sellers profit) I believe ours are supposed to be $45, no big deal. Good luck!

icibiu brings up a good point but generally the concession you're going to receive back is smaller than the downpayment you're going to make so as long as you didn't pay over market value for your home you'll be covered...

For example... if you want to buy a home for $290k with 10k of concessions you'd offer $300k... the FHA requirement on $300k would be $10.5 downpayment so you'd finance $289.5k... as long as your home appraised for at least the $290 you offered (you didn't overpay right? ) you'd be fine.