FHA plans to halve mortgage loan’s 6% seller concession this summer, but it hasn’t happened yet. According to the Washington Post earlier in May of this year, the FHA, Federal Housing Administration, plans to cut maximum “seller concessions” from 6 percent of the home price to 3 percent sometime this summer. FHA rules allow buyers to ask the property seller to pay for some of the transaction fees including loan origination, transfer fees, appraisals, inspections, closing and escrow costs. However, the seller cannot contribute any funds towards the buyer’s downpayment of 3.5% required by the FHA.
A 6% seller contribution can really take the financial strain off the buyer at closing. For example, if the buyer is purchasing a $200,000 house using FHA financing today, the seller can agree to pay at closing all closing costs and even some repairs, up to 6 % of the sales price, or $12,000.
With Fannie Mae or Freddie Mac conventional financing, seller contributions are generally limited to 3 %. According the May article in the Washington Post, when FHA officials announced the policy change this year, they said the long-standing 6 % maximum “exposes the FHA to excess risk by creating incentives to inflate appraised value.” The FHA has decided to cut it’s concession limit in half to prevent further loss and that the cut would be announced in early summer. But so far there has been no public announcement. After the announcement is made, there will be a 60 day period prior to the changes being put into action.
For any buyers out there hoping to take advantage of the FHA seller concessions of 6%, now is the time to act and act quickly before these rules go away. If want to buy a home in Houston, TX, contact me to today to find out about financing options under FHA and the once-again extended First Time Home Buyer Tax Credit or Existing Homeowner Tax Credit. Free property searches are available to you for the Houston and surrounding areas at http:www.GreatHoustonProperties.com.