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Valued Member
Posts: 41
Registered: ‎12-06-2007
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FHA Loan - Lender's credit / sellers' concession?

Hi - Have been pre-approved for FHA Loan of $300,000 with 3.5% down.

Would like to limit our out of pocket closing costs as need to buy some appliances,etc and do not want to take loan on my 401K.

I was told that we can get either Lender's credit or seller concession to cover closing costs.

What is difference between the the 2, costs associated with each and also how to go about having them. Do they need to be in contract for the house?

FYI- There are now real estate agents involved.  

Any help greatly appreciated.

Super Contributor
Posts: 6,479
Registered: ‎07-03-2007
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Re: FHA Loan - Lender's credit / sellers' concession?

Seller concessions:

You find a home for $300,000 and negotiate down to $294,000..... Or pay the full $300,000 and the seller pays $6,000 of your closing costs. Either way the seller gets $294,000. Realtor just writes up the contract this way.

 

Lender credit:

You wualify for 3.5% rate. Lender raises your rate to 3.75% and offers you a credit towards closing costs. The amount they credit depends on the 'yield spread' between those two rates. Sometimes it is a lot and sometimes not so much.

 

Your lender can quote you both ways on the lender credit so you can decide which os best for you.

 

Remember!!!

If the seller pays? You are(in effect) financing closing costs over the life of the loan)

If the lender credits? You might end up paying MORE in higher interest over time than the actual costs out of pocket. The lender can show you the break even point for that.

 

* While I try to visit the forum often, please feel free to contact me directly with a link to your post if I fail to answer a follow up question.

* Lending across the entire 'Great State of Texas' since 2004
Member
Posts: 21
Registered: ‎04-26-2012
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Re: FHA Loan - Lender's credit / sellers' concession?

Seller concessions could be a better deal. The reason is that you can always pre-pay extra to make up for the rolled-in concessions down the road. There's no guarantee that you'll be able to refinance into a lower rate down the road.

Contributor
Posts: 139
Registered: ‎01-22-2013
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Re: FHA Loan - Lender's credit / sellers' concession?

[ Edited ]

Also, if you're a member of USAA or a credit union... see if they have real estate services... We are using Navy Federal's real estate program and we get about 2k back after closing just for using a realtor through them.  I know you said real estate agents are involved... so, not sure if you can switch at this point.

 

We are also getting lender credit but at no cost to the interest rate.  We are having a home built and we are using the preferred lender for the builder.  When doing this, the lender gives 2,500 in closing cost assistance and we actually got the builder to give us 6,500 in closing costs.  So, pretty much all our closing costs are taken care of.

Valued Contributor
Posts: 3,302
Registered: ‎06-09-2010
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Re: FHA Loan - Lender's credit / sellers' concession?


Amythyst wrote:

Also, if you're a member of USAA or a credit union... see if they have real estate services... We are using Navy Federal's real estate program and we get about 2k back after closing just for using a realtor through them.  I know you said real estate agents are involved... so, not sure if you can switch at this point.

 

We are also getting lender credit but at no cost to the interest rate.  We are having a home built and we are using the preferred lender for the builder.  When doing this, the lender gives 2,500 in closing cost assistance and we actually got the builder to give us 6,500 in closing costs.  So, pretty much all our closing costs are taken care of.


While they may be telling you there is no cost to you, since Regulations do not require them to disclose, I can for sure tell you 100% you are paying one way or the other.

 

But none of it matters, if you as the client (customer) are happy with what they offer and services performed. :smileyhappy:

Good Luck
May all your dreams and wishes become a reality!
Regular Contributor
Posts: 223
Registered: ‎01-11-2009
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Re: FHA Loan - Lender's credit / sellers' concession?

Very clear explanation Dallas, thank you. 

Contributor
Posts: 78
Registered: ‎12-22-2009
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Re: FHA Loan - Lender's credit / sellers' concession?

@DallasLoanGuy

...and others :smileyhappy:

 

Seller Concessions

 

  1. How often is a request for seller concessions accepted?
  2. Is the acceptance solely up to the seller, or does the LO also come into play

I'm in middle NJ (Union County) and very interested in this option, typically to maximize the amount of funds being used for the down payment on the home loan.

 

Cheers,

Randy


Starting Score: (2009) EQ = 626 | TU = 664
Current Score: (03-18-2014) EQ = 737 | TU = 703 | EX = 723
Goal Score: 740


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Super Contributor
Posts: 8,353
Registered: ‎09-28-2007
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Re: FHA Loan - Lender's credit / sellers' concession?

Completely up to the seller if they want to give you a seller closing cost credit.  If the real estate market is hot and the seller expects a lot of full price offers, they could be less likely to give you a closing cost credit because

1) they may get another full price offer without asking for a seller credit and/or

2) if they bump up the price by the same amount of the closing cost credit they may think the home would have trouble appraising for that much

 

If there is a home you really want, I would make getting the seller credit your plan B and make your plan A paying your own closing costs & down payment.  If you are open to purchasing any home as long as the seller would give you a closing cost credit, then you can make that your plan A since obviously you'd be holding out until you find a seller who'd agree.

 

And remember like Dallas said, you can always ask your loan officer to up the rate in trade of a lender closing cost credit.

Super Contributor
Posts: 6,479
Registered: ‎07-03-2007
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Re: FHA Loan - Lender's credit / sellers' concession?


rehr22 wrote:

@DallasLoanGuy

...and others :smileyhappy:

 

Seller Concessions

 

  1. How often is a request for seller concessions accepted?  i see them a LOT.... however, we are in a seller's market here and the credits arre dwindling.
  2. Is the acceptance solely up to the seller, or does the LO also come into play    all seller. this is part of the negotiations. if you pay close to full price you should get a little bit at least

I'm in middle NJ (Union County) and very interested in this option, typically to maximize the amount of funds being used for the down payment on the home loan.

 

Cheers,

Randy



 

remember.... real estate is LOCAL. what i see here will be different than what you see.

 

* While I try to visit the forum often, please feel free to contact me directly with a link to your post if I fail to answer a follow up question.

* Lending across the entire 'Great State of Texas' since 2004
Contributor
Posts: 78
Registered: ‎12-22-2009
0

Re: FHA Loan - Lender's credit / sellers' concession?

Shane,

Dallas,

 

Thank you both for the details, very informative.

 

Things are very hot in NJ and inventory is low, so won't get too hung up on this.


Starting Score: (2009) EQ = 626 | TU = 664
Current Score: (03-18-2014) EQ = 737 | TU = 703 | EX = 723
Goal Score: 740


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