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 contribution. Fannie Mae opposed the Alliance's recommendation that sellers contribute 3 percent plus $300 for prepurchase counseling.
Fannie Mae, in turn, agreed to allow private subordinate financing, waive the proof of resident-alien status requirement and accept the Alliance's proposal for the maximum seller contribution.
**Seller-paid closing costs subject to seller contribution
* Offers, incentives, and seller contributions
, if any, vary by community and are subject to certain terms, conditions, and restrictions.
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
. However, we found that only 3 percent of builders in our survey were offering free trips, and less than 1 percent were including cars with their homes.
However, when seller contributions
of about $7,500 were deducted, the actual gain was closer to 2.5 percent per year.
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.
How about a purchase loan with seller contributions
? What about a purchase loan with both low reserves and seller contributions
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
Believe it or not, the IRS recently ruled that home buyers can now deduct seller contributions
toward financing costs, and sellers can still deduct their outlays as well!