In short, no. But the seller can contribute to the FHA closing costs associated with your loan. That is, if the seller agrees to do so. According to FHA guidelines, the seller of a property can contribute up to 6.00% of the sales price of the home toward your closing fees. Let’s take a look at how easily this can be done. However, care should be taken when the maximum amount is contributed as the seller contribution could lower the appraised value of the home.
Say there’s a house listed for $200,000. Closing costs for FHA loans in Houston and surrounding areas can vary but a reliable estimate might be around $4,000 or so. Using this example and taking into account the required 3.5% down payment of $7,000, you’ll need $11,000. If the seller contributes 3.00% of the sales price, that’s $6,000 toward closing charges. Your sales contract should clearly spell out the amount and what the seller contribution will be used for. If you have a $6,000 seller credit, you’ll need another $5,000 to make the $11,000 amount needed. You’ll notice the seller credit on your final settlement statement and while the seller can’t help with your down payment, all the funds get lumped together with no differentiation.
What if the seller declines your request to pay for some or all of your closing costs? The seller is under no obligation to oblige and if the market is rather strong for sellers there may be no inclination to contribute anything. In such an instance, before you make an offer, add the amount needed for closing costs to the sales price.
Again with the same example, if you need a $5,000 seller contribution, make an offer of $205,000. The seller nets the same and you get the seller credit. Yes, you’ll have to raise your loan amount but the amount is tiny compared with the $5,000 cash out of your pocket instead. Another word of warning, if your offer is above what homes are selling for in the area, your property may not appraise. Work with your real estate agent before making any such offer to make sure you get both your closing costs paid for as well as the proper appraised value.