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Using Up Seller Credits for Closing Costs; Rent-Backs

Remember that seller-credits on a purchase can be used for both non-recurring and recurring closing costs. If a seller-credit is too large, we can charge extra points to use up the entire credit, and then rebate those points after close of escrow.

This is a convenient tool that we employ often to eat up closing cost credits that are put in place for a variety of reasons.

Also, please remember that “rent-backs” work just like a closing cost credit. Rent-backs can be a problem if we are not aware of them, and total credits end up EXCEEDING total closing costs. If this happens, especially on an FHA deal, the borrower will be caught bringing in too small of a down payment (below the required 3.5%, for example). Be careful with large rent-backs if closing costs are already covered by another seller-credit.

Remember too that lenders do not want to see rent-backs exceeding 30 days; longer rent-backs violate owner-occupancy requirements.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167