13 Things First Time Home Buyers should Know About Seller Concessions
Design by Diana Walton- Houston First Time Home Buyer Specialist
Hello and welcome to Houston First Time Home Buyers Edition, formally First Home Houston (FHH). One term you may hear during your first time home buying process is seller concession. Seller concessions can be beneficial for all parties in a real estate transaction. A seller concession is an agreement between the buyer and seller in which the seller agrees to covers a portion of the buyer's expenses. Please keep in mind that this is not something the seller has to agree to. Some sellers can and will refuse to pay any concessions at all. Yet, it never hurts to ask. Nicely.
First time home buyer's agent can ask for seller concessions during different times during the first time home buying process. For example, once the inspection has been completed, the buyer can ask the seller to pay for certain repairs. This however, does not mean that the seller will do so or has to. While the seller can opt to pay for certain repairs, the seller may also refuse to pay for others. Below is a list of the benefits and limits of seller concessions:
Seller concessions can include appraisal fees, Loan origination fees, home inspection and title search fees, credit report fee, tax fee and discount point charges.
Seller concessions are more likely in a buyers' market than in a sellers' market.
Concessions benefit both buyer and sellers.
Seller concessions helps to reduce the upfront cost the buyer has to pay.
Seller concession may help a home to sell more quickly.
For conventional loans with down payment less than 10% the seller concession can be up to 3%. With down payment between 10% and 25%, concession can be up to 6% and 9% if the down payment is 25% or more.
FHA have a maximum concession amount of 6% of the purchase price. This amount cannot be applied to the down payment.
VA loans limit seller concession to no more than 4% of the purchase price.
USDA home loan limits seller concessions to 6% of the purchase price.
The mortgage lender has to approve the seller concession.
Seller concession can cover either specific costs or pay a fixed amount of the total closing cost.
The seller is the only one that can make the decision to contribute or not to contribute.
As always, thank you so much for stopping by. Remember, if you are thinking of purchasing your first home, please contact us. We are here to help. We have been helping Houston first time home buyers since 2011 and we can help you. I hope you have an amazing day. Until next time...Diana
