FHA Seller Concessions
The Federal Housing Administration has set the standard for the maximum amount of concessions a seller is allowed to pay on a buyer’s behalf. Seller concessions is the proper terminology for stating how much the seller is going to contribute towards the buyer’s closing costs and pre-paid items. Currently, the maximum a seller is allowed to pay towards closing costs and pre-paids is 6% of the final purchase price.
In some states, such as Texas, it is customary for the seller to pay for the buyer’s Owner Title Policy (OTP). In these particular states, where there are fees that are customary to be paid by the seller, it is acceptable for the seller to pay the full maximum of 6% plus the buyer’s Owner Title Policy (or other fee type).
The seller concessions can only be allocated towards closing costs and pre-paid items. In the event that you have an excess of seller concessions, you cannot use this towards your down payment requirement. Unfortunately, any excess seller concessions will be returned to the seller. The guidelines have strict verbiage regarding the buyer paying for their down payment with qualified funds (their own funds or gift funds from a family member) and any amount paid by the seller who is an interested party would be unacceptable.
Seller Paid Closing Costs