Can I Ask the Seller to Pay the Closing Costs?
While it happened in very few situations in the past, it has become very common, over the last decade, to ask the seller to pay some or all of the closing costs when you purchase a home. Basically, they will include the closing costs to the negotiated price of the real property. It comes down to financing your closing costs since you will probably pay a little bit more for the property than you would if you were paying your own costs. Most sellers now even make a counter-offer and place a limit on the amount of closing costs he will pay on behalf of the buyer.
What are the advantages of asking sellers to cover the closing costs? First closing costs can vary widely, mostly dependent upon the cost of the mortgage loan. By asking to pay the closing costs, buyers secure a variable cost. Besides if you add the closing costs to the purchase price, most of those costs would be a part of the loan. Instead of getting his closing costs paid for free, buyers would have to pay them over the life of the mortgage loan.
However, bear in mind a few simple rules when asking sellers to pay your closing costs. Regarding conventional loans you can only ask the seller to pay non-recurring costs, but not pre-paid or items to be paid in advance. Besides if you are putting 10% or more, the most the seller can contribute is 6% of the purchase price. In the case that you are putting less down, the most the seller cannot contribute more than 3%.
As for VA loans, you can ask the seller to pay everything. This is called a "VA No-No", meaning that the buyer is making neither down payment and nor paying any closing costs. If you are a seller you would be well advised to determine a ceiling on the amount they will pay, just to make sure no one gets carried away.
Eventually on FHA loans, you can also ask the seller to pay everything. But the buyer must hold a minimum of 3% investment in the property, whether that is applied toward down payment, closing costs, or items paid in advance. This minimum percentage can be from their own pocket or a gift from a family member.
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