Seller-funded buy-downs

With so many homes on the market, and sellers and agents trying to find ways to sell them, a seller-funded buy-down is a great option. Most buyers are using the FHA program that allows up to 6% in seller concessions. On Most transactions, 3-4% will cover all of the closing costs; bank fees, title fees, pre-paids items, and taxes. If you receive an additional credit, you should use that to buy the rate down. If you receive the full seller concession, you should be able to buy the rate down .25 to .75%. That savings in rate is much bigger over the lifetime of the loan, that if you were to buy the home for 10k less. This program can be very helpful to all parties involved, if it is structured and priced correctly. If a borrower receives the full seller concession, please make sure your broker uses it to buy the rate down. Some brokers will use it to pay themselves points and fees. If should be listed on the GFE as a “Discount Point”, not under origination.

On the conventional side of financing, seller concessions are also allowed, but they are based on the LTV. The lower LTV, the higher the allowable seller concession.

MD Sr. Mortgage Broker
Fairfax County Homes