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Seller concession Limits

January 3rd, 2023 10:23 AM by Sam Kader MLO130505

It's a buyer's market again and seller concessions are coming back more frequently. Here's more information on seller concessions and/or Interested Party Contributions (IPC -  Interested Party Contributions (IPCs) are someone other than the borrower who has financial interest in or can influence the terms and sale or transfer of the subject property. IPCs can be the seller, selling or listing agent). 

  1.  Concession can ONLY ONLY be used to reduce the buyer's closing costs
  2.  Concession CANNOT  be used for the buyer's down payment or for any other costs associated with the home such as new windows, new appliances or for repairs. 
  3.  Concession CANNOT  be used as cash back to the buyer's at closing. Unused seller concessions will revert back to the seller. 

Typical fees or closing costs that are common and customary that can be covered by seller concessions: 

  • Appraisal fees
  • Attorney fees
  • Loan discount
  • Origination point
  • Real estate tax service fees
  • Transfer taxes
  • Title insurance premium
  • Pre-Paid items. 

Depending on the down payment - seller concessions or total concessions/credit are capped/maxed out as shown below (% of selling price):

IPCs that exceed these limits are considered sales concessions. The property’s sales price must be adjusted downward to reflect the amount of contribution that exceeds the maximum, and the maximum LTV/CLTV ratios must be recalculated using the reduced sales price or appraised value. More information from FNMA selling guide here

Posted by Sam Kader MLO130505 on January 3rd, 2023 10:23 AM



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