Realtor misinformed us of seller contribution limits. He told us 3% for FHA and it's really 6%, any recourse?

Question

We put in an offer for a foreclosed home and explained to our Realtor that we did not want to pay any closing costs. He told us that the limits for FHA were 6% (3% downpayment assist. and 3% closing costs contributions). I found out today through my own searching that the sellers can contribute up to 6% closing costs and still do the 3% down payment help. I feel like we were totally misled! Is there anything we can do? The offer has been accepted, but the purchase agreement has not been signed.

Answer 1

Do you mean that you are buying a foreclosed home and you are using an FHA loan, or do you mean that you are buying a HUD owned home?

On HUD owned homes, the maximum that HUD will contribute is 3%, and it does not matter if you are getting an FHA loan, conventional loan or paying cash.

If you are getting an FHA loan, and the house is NOT owned by HUD, then 6% allowable seller contribution is correct - but the buyer MUST contribute 3% of their own funds.  So to receive the total 6% that you want, there must be at least 9% in closing costs, pre-paids and down payment.  If the total ends up being 7% (for example), and you negotiated 6% help, then you'll end up leaving 2% "on the table" because the seller will only end up paying 4% of help, and the price will not get lowered to cover the 2% you lost.

Answer 2

Your Realtor was right- 6% can be total seller contributions- down payment assistance program and closing costs total.

Answer 3

Wrong legally the most a seller can contribute it 6% total. Realtor was right

Answer 4

Your Realtor was right.  The 6% maximum contribution is 3% towards closing costs and 3% to down payment assistance (DPA).  The lending guidelines are likely to change in the very near future and the DPA will be removed from all FNMA loans, so no seller contributions will be allowed.

Answer 5

You best bet is going to be to ask your attorney.

Answer 6

I work in the mortgage industry.  It is true that FHA will allow a seller to pay up to 6% of the purchase price towards buyers closing costs and pre-paids.  However, the 3% down payment must be made by the buyer.  FHA will allow a gift of 3% from a family member as long as it is documented correctly.  A conventional loan will allow a maximum of 3% seller concessions.  Now realize that not all sellers are willing to pay the full 6% seller concession.  The agreement must be signed by both buyer and seller.  Your only recourse is to discuss this with your realtor.  If the sellers do not agree to pay the 6%, then your only other alternative is to find a new seller willing to pay the full 6%.