Is this kosher? Seller buydown for interest rate

[dianas]

Let's say I would normally offer a seller $175000. Instead, I offer $185000 and they contribute $10000 to buying down the interest rate. I believe this would give me a lower mortgage payment? But is this acceptable?

[Anonymous]

I believe what you are thinking of is offering more money for the house and asking for closing costs...the closing costs buy down the mortgage interest rate.

Assuming the house appraises for the higher value people do this a lot....you are just rolling over the costs into the mortgage so you don't have to come out of pocket at purchasing time.

Message Edited by 1111mel on 11-16-2008 10:48 PM

[ShanetheMortgageMan]

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@dianas wrote:
Let's say I would normally offer a seller $175000. Instead, I offer $185000 and they contribute $10000 to buying down the interest rate. I believe this would give me a lower mortgage payment? But is this acceptable?

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Yup it's perfectly fine, but just like mel said, the home needs to be able to appraise for $185k.

[LisaJ]

I did this.  We offered more and the seller "paid" all closing costs.  It worked well for us!

[teton]

Can this be done with an FHA loan or did they eliminate seller contributions?

[BrianB_The_Loan_Professor]

FHA allows the seller to contribute up to 6% for closing costs

This could be used for the buy down

The seller cannot contribute towards the down payment any longer

Brian

[teton]

The developer where I'm considering buying gives a $1000 Lowe's gift card at closing. Would this be considered part of the 6%?

[ShanetheMortgageMan]

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@teton wrote:
The developer where I'm considering buying gives a $1000 Lowe's gift card at closing. Would this be considered part of the 6%?

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Yes.