1, 2005 Summary of borrower's Summary of seller's transaction transaction Contract sales price Contract sales price $970,000 Settlement charges Assessments paid by Assessments paid by seller in advance seller in advance Gross amount due from Gross amount due to seller $970,000 borrower Earnest deposit Settlement charges $15,460 Principal of new loan Loan payoff $100,000 Q1 exchange funds Q1 exchange funds $834,028 Seller contribution Seller contribution
$20,000 Assessments unpaid by seller Assessments unpaid by seller $512 Total paid for borrower Total reduced from seller $970,000 Cash from (to) borrower Cash to (from) borrower $0 Exhibit 2: Purchase of new property by taxpayer (borrower)--settlement date Feb.
Seller-paid closing costs subject to seller contribution
Fannie Mae guidelines said that seller contribution
could not exceed 3 percent, and therefore, it said the extra $300 for counseling was excessive.
The sellers being eager to not have to hassle with lock boxes, and multiple open houses, and a variety of offers, happily accepted this price as it was a conventional loan where the buyer did not ask for any seller contributions
A lot has been reported in the media about builders throwing in cars or sending their buyers on vacation--the types of sales incentives that can clash with lenders' limits on seller contributions
MOIC will insure loans with loan-to-value (LTV) ratios up to 103 percent, depending on a borrower's credit; and seller contributions
and gifts or grants may be used to cover a portion of down payment and closing costs.
Builders should realize that the housing finance industry places limits on the amount of seller contributions
to a home sales transaction.
When the underwriter combined seller contributions
with low reserves, the delinquency rate rose 179 percent.