I need some closing costs paid by the seller, but how much?
It is common for buyers to want assistance with closing costs when they are getting ready to purchase a home. Remember that closing costs are separate and above the amount of down payment required by the lender to get a loan on your new home. What do a buyer’s closing costs consist of? Buyer’s closing costs are a combination of a portion of the title policy, the appraisal fee, tax and flood certificate fees, title fees such as recording, escrow, delivery, copy and recording fees, HOA transfer fees, and possibly a few other negotiable fees such as the cost of a survey.
Closing costs are also different than prepaid items. Prepaid items usually consist of one year’s worth of homeowners insurance, and a minimum of three months of property taxes to be held in escrow.
How much in closing costs can a buyer ask for while negotiating their offer with a seller? The amount is always negotiable, but the following rules apply depending on the type of loan the buyer is using.
With a conventional loan with 5% down payment, the most in closing costs they can ask a seller to pay is 3% of the sales price. If they are putting 10% down with a conventional loan, the seller can pay up to 6%. If the buyer is doing an FHA loan, the seller can pay up to 6% of the sales price in closing costs. And if the buyer is using a VA loan, the seller can contribute a maximum of 4% in closing costs.
These are great numbers to use as a guideline when considering how much you will require as a buyer, and also what the maximum amount you could ask for in assistance toward closing costs from the seller.
image courtesy of zzzack
