Great article from Bill Nickerson
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As much as things change in the mortgage industry, many things stay the same. If you are applying for a Home Loan with less than 20% down, did you know that you can still
receive gift funds from several different sources? Did you know the seller can give up to 6% of the sales price to the buyer to be applied towards closing costs? It can never hurt to ask your family, the sellers as well as your employer when purchasing a home.
Gift Funds:
As each mortgage program comes with its own set of guidelines, Gift funds to be used towards the purchase of a home are allowed from a family member, domestic partner, borrower’s employer, a charitable organization, governmental agency, or public entity that has a program to provide home ownership assistance to low and moderate income families or first time homebuyers. In some cases, a close friend with a clearly defined and documented interest in the borrower. A gift letter is required. Transfer of the gift funds must be documented. The file must document that the gift funds were from an acceptable source and were indeed the donor’s own funds.
Seller Contributions:
When you submit an offer to purchase a home, it is common to ask if the seller will give a credit back to be applied to closing costs. Depending upon the specific type of mortgage product you apply for, the sellers can give up to 6% of the sales price toward actual closing costs, prepaid expenses, discount points and other financing concessions. Also included in seller contributions are interest rate buy downs and payment of Up Front Mortgage Insurance Premium (UFMIP). Each
dollar exceeding the 6% must be treated as an inducement to purchase. In other words, if any monies are left over after paying the closing costs and pre-paid items, they must be returned to the seller. A buyer can not walk away from the Closing table with extra funds.
I have included a printable flyer that shows you the amounts that are allowable as seller concessions to be used for closing costs.
If you have any questions about Gift Funds or Seller Concessions, feel free to call or email me anytime. I can be reached at 978-273-3227 or email me at bill@billnickerson.com