What are Seller Credits or Seller Concession

What are Seller Credits or Seller Concession

When purchasing a home you might hear the phrase “Seller Credit” or “Seller Concession.”  So what exactly is your Realtor or Mortgage person talking about when they say this?

A Seller Credit -or- Seller Concession is a credit that the seller is giving you to cover things such as closing costs.  These creditcan be apply to any type of CLOSING COSTS incurred by the buyer:  The Credit can NOT be used or applied to the DOWN PAYMENT on the home.

Here is a list of costs that the CREDIT can be applied to:

 

  • title charges
  • state and county transfer stamps and fees
  • recording fees
  • attorneys costs
  • inspection fees
  • upfront points
  • appraisal fees
  • homeowners insurance
  • pre-paids
  • escrows
  • any other fees and costs associated with the purchase and closing of the mortgage loan

Sellers concessions can also be used to buy discount points. Discount Points are used to lower borrower’s mortgage rates.  Paying Discount Point is a way many home buyers obtain a lower interest rate, but this is NOT NECESSARY or REQUIRED in most cases.

What is the MAXIMUM Credit Allowed:

The Maximum amount of Credits allowed is based on the type of Mortgage product you have chosen

 

  • Under HUD, the parent of FHA,  FHA allows a maximum of 6% sellers concessions
  • For VA loans, the maximum amount of sellers concession sellers can offer buyers is 4%
  • USDA loans allow a maximum sellers concession of 6%
  • With conventional loans, if purchasing an owner occupant home, a maximum of 3% sellers concession is allowed
  • If home buyer is purchasing a second or vacation home, a maximum of 3% sellers concession from the home seller to the home buyer is allowed
  • However, if buyer is purchasing an investment home, then the maximum a home seller can offer in sellers concessions is no more than 2% sellers concession to the investment home buyers

 

LIST of most common CLOSING COSTS on a Home Purchase

 

  • title charges
  • transfer stamps
  • inspection costs
  • appraisal fees
  • upfront points
  • homeowners insurance
  • pre-paid items
  • any other costs and fees associated with the closing of a home loan

 

 

 

 

 

 

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Regulatory Information: Nationwide Multistate Licensing System's Consumer Access Website" (www.nmlsconsumeraccess.org), Premier Financial Services, Inc. NMLS #266214. The State of Illinois | Division of Banking located at 100 W Randolph St, Chicago, IL 60601 (312) 814-4500 | NMLS # 266214 Dan Frio NMLS 246527
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