How Much Can The Seller Contribute Toward A Buyer's Closing Cost?

How much can a seller contribute toward a buyer’s closing cost?

You are sitting down with a client who is ready to submit a contract. They want to have as little out of pocket as possible when they purchase a home. They ask you how to do that.

In Maryland the average closing costs and pre-paid items (pre-paid interest, taxes, homeowner’s insurance, escrow set-up) can run between 4%-6% of the purchase price. One way to keep out of pocket costs down for a buyer is to request that the seller contribute toward the buyer's closing costs.

How much they can contribute depends on:

1. the type of loan the buyer will be using

2. if the property will be owner occupied

If the buyer will be using:

1. Conventional financing (Fannie Mae, Freddie Mac) and the loan to value (LTV-the loan amount as a percentage of the purchase price) is

90% LTV or More Max 3%

75.01%-90% LTV Max 6%

75% LTV or Less Max 9%

If the owner will not be living in the property (non-owner occupied/investor) the maximum seller contribution is 2%.

Loan to Value has no consideration.

2. FHA financing (Only available for Owner Occupied)

Seller contribution is always a maximum of 6%

3. VA financing (Only available for Owner Occupied)

• Seller may pay no more than the actual total of closing costs and pre-paids
• Seller may contribute up to 4% seller concessions in addition to the actual total amount of closing costs and prepaid items

4. USDA financing (Only available for Owner Occupied)

• No Limit to Seller contribution
• Some investors limit the contribution to 6% of the purchase price
• Closing Costs may be financed up to 100% of the APPRAISED value (not the purchase price).

Closing costs vary by State and County.

If you are a buyer's agent or a buyer in Maryland, please feel free to contact me for a handy seller contribution chart and/or a Loan calculator that will help you and your buyer to estimate closing costs.

If you are a listing agent or seller in Maryland, please contact me for an estimated net proceeds calculator that will help you to estimate the cost to sell your home.