FHA Not Allowing Seller To Give Me Security Deposits

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FHA Not Allowing Seller To Give Me Security Deposits

Birdsboro, PA · Member since 2017 · 5 posts · 0 votes

I'm using an FHA loan to acquire a duplex. I'm a few days from closing and when the title company sent out the settlement sheet with the security deposits and prorated rents as a credit to me from the seller my bank went crazy.

First they said I need an addendum stating that the seller is crediting me.

Then they said I need an addendum nulling that addendum because the seller can't give me that as a credit. FHA doesn't allow this.

How is it possible that FHA didn't account for security deposits and prorated rents? It can't be? I'm guessing my bank is wrong. Does the FHA guidelines say anything specific about this?

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Russell BrazilBusiness Member

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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

Sounds like an issue with your bank. I've had security deposits and pro rated rent at closing on dozens of deals with all kinds of loans including FHA.

Are you maxed on credits?

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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
2y
Sounds like an issue with your bank. I've had security deposits and pro rated rent at closing on dozens of deals with all kinds of loans including FHA.
Are you maxed on credits?
[email protected]301-893-4635 Podcast Guest on Show #192
District Invest Group545 Reviews
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Jacob Sherman
12 Penns Trail Suite 138 Newtown, PA 18940 · Member since 2023 · 1k+ posts · 319 votes
2y
Are you getting more than 6% sellers assist ?
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Tom GimerBusiness Member
DMV · Member since 2017 · 3k+ posts · 3k+ votes
2y
If the lender doesn't want the deposit(s) shown as a credit to the buyer (after all, these are not funds used to reduce the cash from buyer, they are third-party funds), the new security deposit escrow account can be the line item beneficiary on the seller-side only.

Line ~506: Security Deposit(s) to ESCROW (or similar). Could also be handled POC.

Always confirm the amounts claimed to be held by the seller match the tenant records.
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Will Fahmy
OP
Birdsboro, PA · Member since 2017 · 5 posts · 0 votes
2y
Quote from @Russell Brazil:

Sounds like an issue with your bank. I've had security deposits and pro rated rent at closing on dozens of deals with all kinds of loans including FHA.
Are you maxed on credits?
Nope not maxed out. But yeah you were right.
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Will Fahmy
OP
Birdsboro, PA · Member since 2017 · 5 posts · 0 votes
2y
Quote from @Jacob Sherman:

Are you getting more than 6% sellers assist ?

No they just wanted me to reword the change in terms addendum. Update posted. Thanks!
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Will Fahmy
OP
Birdsboro, PA · Member since 2017 · 5 posts · 0 votes
2y
Quote from @Tom Gimer:

If the lender doesn't want the deposit(s) shown as a credit to the buyer (after all, these are not funds used to reduce the cash from buyer, they are third-party funds), the new security deposit escrow account can be the line item beneficiary on the seller-side only.

Line ~506: Security Deposit(s) to ESCROW (or similar). Could also be handled POC.

Always confirm the amounts claimed to be held by the seller match the tenant records.

This makes sense to me. But after pressing them they told me basically they didn't want it to be labeled security deposit. They just wanted it to be a credit to buyer from seller.
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