Seller Contributions in Relation to 203k Loans

How Much Can a Seller Contribute to a 203k Loan Borrower?

In order to help buyers who may not have much cash on hand, the FHA allows sellers to contribute up to 6% of a property’s sale price towards a borrower’s closing costs. For example, if you were to purchase a home for $300,000, the seller could pay up to $18,000 in closing costs for you.

What Closing Costs are Commonly Paid by Sellers?

If they choose to do so, sellers can pay pretty much any closing cost for an FHA loan borrower. Commonly paid costs might include appraisal fees, escrow fees, title search costs, loan origination fees, and even mortgage points.

What Happens if a Seller Pays More Than 6% of the Home’s Sale Price in Borrower Closing Costs?

While rare, in some cases, a seller may contribute more than 6% of the property’s sale price in borrower closing costs. This could occur in a situation where the seller wants to sell a home extremely quickly, and is willing to do whatever it takes to get the buyer to agree to a fast deal. However, if a seller contributes more than 6%, the amount above 6% will be reduced from the amount of the borrower’s FHA loan.

For example, if a borrower purchased the same $300,000 home referenced in the example above, and the borrower decided to pay $20,000 in closing costs for the borrower, the FHA would likely reduce the borrower’s loan amount to $298,000.

If you’d like to learn more about FHA 203k loans, simply fill out the form below and a friendly FHA home loan specialist will get in touch!