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Down Payment Assistance – Requires Seller Credit for “No Cash Out of Pocket” Closing

Down Payment Assistance - Requires Seller Credit for "No Cash Out of Pocket" Closing

I blogged Thursday about Down Payment Assistant Programs and about the Chenoa program in particular.

We received a lot of positive responses but I still sensed some confusion in regard to one of the points I made.

THE NEED FOR SELLER CREDITS

If buyers have very little cash on hand, they will need a seller credit as well as down payment assistance if they want to get into a home with no or minimal cash out of pocket.

Once again, down payment assistance programs only cover down payments; they do not cover closing costs – which can often be as much as the down payment itself.

In addition, down payment assistance programs usually offer no “rebate” or commission to lenders, so lenders are unable to offer lender-credits for closing costs.

Hence, the only way a buyer, with no access to cash, can purchase a home is with a combination of a seller-credit and down payment assistance.

I should add that we well-realize that seller-credits are taboo and/or a near-guarantee that an offer won’t be accepted in many markets.

So, we never advise potential buyers to seek seller credits per se.

We make it clear to such buyers that they need to discuss the topic with their agents; that we, as a lender, cannot make such requests; and that such requests are deal-killers in many markets.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 310167