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.
Up to $600 seller contribution
toward a 2-year home warranty plan (independent home warranty provider of buyer's choice).
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.
It can be a true no-cash-out-of-pocket loan," explains Lee Farrell, a product manager at North American Mortgage Company, "because the remaining three percent, or down payment, can come from a gift, grant, unsecured loan, personal loan, seller contribution
, or 401(k).
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.
Any other seller contributions
will be in addition to this incentive program.
Auction terms include owner financing on most properties, huge seller contributions
towards closing costs and a very low 6% buyer premium.