Sellers can credit up to 6% of the sales price, in most cases, as a credit for ALL closing costs – including non-recurring and recurring fees. This includes transfer taxes. Closing cost credits should just be for “closing costs” and not for “non-recurring costs” only. Many people think closing cost credits cannot exceed 3%, but that is not the case unless the loan-to-value ratio (LTV) is 90% or more and the loan is conventional. Closing cost credits can actually go up to 9% of the sales price if the LTV is under 75%.
Closing cost credits for Investment Properties are more limited; they cannot exceed 2% of the sales price.
Realtors can credit their commissions for closing costs as well.
Tomorrow we will discuss what to do if a closing cost credit is too large.
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