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Understanding Seller Paid Closing Costs
In
a strong buyer's real estate market, where there are
many more homes for sale than people shopping for
property, sellers must do everything they can to make
their listing stand out from the rest and present
an attractive deal. Many offer to pay a prospective
buyer's closing costs, up to a certain percentage
of the purchase price. This is particularly attractive
to first
time home buyers who may struggle to come up with
the funds for both a down payment and closing costs
(generally 3 to 6 percent of the loan amount.)
When considering seller paid closing costs there are a few things to understand:
The Limits of Your Mortgage Loan Program
Each home loan has specific guidelines that must be
met in order for the loan application to be approved.
Some will allow the seller to contribute towards closing
costs up to a certain percentage of the loan amount,
but others won't. If you plan on using seller paid
closing costs as part of your home
financing talk to your mortgage
loan officer about whether there is a loan program
for your scenario that will allow it. Be sure that
the seller does not pay more than the permitted percentage
or it could jeopardize your loan approval.
Tax Deductions
It may come as a surprise, but some of the closing costs may be tax deductible even if paid by the seller. Be sure to consult your tax advisor for details.
Even if the seller of the home you're interested in has not stated they will pay closings costs it is something you can request when making an offer. Talk to your real estate agent about writing this option into the offer to purchase.
Taking advantage of seller paid closing costs can
be an excellent way to pay a little less out of pocket
when purchasing
a home.
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