Closing cost credits from sellers are rare in this very competitive seller’s market, but they do come up from time to time as buyers negotiate them in lieu of repair-credits.
This is a reminder that seller credits can go up to 6% of the sales price for conventional and FHA purchases. Jumbo lenders typically limit seller credits to 3% of the sales price. And, investor financing only allows credits up to 2% of the sales price, irrespective of the loan amount.
Seller Credits can cover recurring and non-recurring closing costs but they cannot exceed actual closing costs. If credits do exceed closing costs, they are simply wasted (they do not go back to the buyer or pay down principal). Further, recurring closing costs cannot be padded by prepaying property taxes or HOA dues.
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