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

[juggalo9er]

not trying to thread jack at all i just want to make sure i understand this. in my situation i am paying 83500 and seller is paying 2000 toward closing, is this in an essense financing closing cost...

[ShanetheMortgageMan]

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@juggalo9er wrote:

not trying to thread jack at all i just want to make sure i understand this. in my situation i am paying 83500 and seller is paying 2000 toward closing, is this in an essense financing closing cost...

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You could look at it that if the seller wasn't going to pay $2k towards your closing costs you could have purchased the home for $81,500 instead.  But technically no, the closing costs aren't financed into the loan amount on a VA loan (other than the VA funding fee).

[Corn9977]

Not a mortgage pro so my experience may be limited to Virginia...be aware that if you rely on a seller's credit/subsidy, the home must appraise for a value that includes that subsidy. So if you are looking at $300k with a $6k subsidy, the home must appraise for $300k, not the $294k the seller keeps. It's still worth trying, but we had to give up a subsidy to keep a deal afloat after a low appraisal (market was hot enough last year in northern Virginia that prices were increasing faster than appraisals).

[ShanetheMortgageMan]

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@Corn9977 wrote:
Not a mortgage pro so my experience may be limited to Virginia...be aware that if you rely on a seller's credit/subsidy, the home must appraise for a value that includes that subsidy. So if you are looking at $300k with a $6k subsidy, the home must appraise for $300k, not the $294k the seller keeps. It's still worth trying, but we had to give up a subsidy to keep a deal afloat after a low appraisal (market was hot enough last year in northern Virginia that prices were increasing faster than appraisals).

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That is correct.  On any mortgage the home must appraise for at least the purchase price, otherwise the lower appraised value would be used to calculate the down payment/maximum loan amount, etc.   For example, let's say you were doing a loan that required a 5% down payment, on a home that you agreed to purchase for $300k.  If it only appraised for $294k, and you still agree to purchase the home for $300k, then the down payment would be the $6k difference + 5% down on $294k ($14,700) = $19,700.