David Saks: Contributions to Closing Costs : No Tax Deductions and Not Charity

David Saks - Real Estate Broker - The Real Estate Mart of Tennessee, Inc. - 4040 North Watkins-Suite #4 - Memphis, Tennessee 38127 - Phone (901) 357-4663

Contributions to Closing Costs : No Tax Deductions and Not Charity


When a buyer doesn't have all of the cash that they need to close, after they've coughed up the downpayment and other loan expenses, the seller might want to come to the rescue and make up the difference.

Can this be helpful to the buyer?

Can it be more helpful than reducing the price of the loan for the same amount as the contribution?

There are limits as to the amount of money that the seller may contribute to the closing costs of the loan.

When those limits are exceeded the amount of the loan can be cut back.

Seller contributions can also affect maximum loan amounts for FHA loans.

Can the seller hurt the buyer with a closing contribution?

What are your experiences with seller contributions and how have seller contributions impacted closing or changed the existing or pending financing arrangements for your buyers?

David Saks

Time&Temp Memphis

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Comment balloon 6 commentsDavid Saks • May 18 2008 04:37PM


By using down payment assistance programs, the seller can help with contributions for the initial 3% required down payment also. I have helped customers Buy a home with only the cost of the appraisal upfront and financed 97%.

Posted by SHAUN WREN (LICENSE IS NOT PLACED) almost 12 years ago

Very good, Shaun ! Great ways to obtain seller financing. Thanks for posting.

Posted by David Saks ((retired)) almost 12 years ago

In NH there are regulated limits 3%-6% depending on the program. In many cases it can make or break a deal.

Any money outside of the HUD (usually repairs) is difficult to get OK'd and if done is held in escrow and doled out by the Lender.

Posted by Joan Mirantz, Realtor, GRI, CBR, SRES - Concord New Hampshire (Homequest Real Estate) almost 12 years ago

Seems like 3-6% has become standard, Joan, all over. Thanks for posting. Hope you had a fine weekend.

Posted by David Saks ((retired)) almost 12 years ago

David, closing cost assistance is become more common these days, great post.

Posted by * Rate A Home (Rate A Home) almost 12 years ago

Even though the government is well known to spend a thousand dollars on toilet seats and screwdrivers, Duane, we all know that FHA won't pay closing costs, but they allow us to add the costs to the total in order to determine how much cash we have to put down. The seller contributions restrict the amount of the financed costs. Although the FHA might allow some seller contributions, i.e., percentage of the value of the property, prepaid taxes and insurance, permanent interest rate buydowns above a normal discount, the microwave oven (which they might not, of course), :-) etc, the lender might not.

Posted by David Saks ((retired)) almost 12 years ago

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