Concession Limitations
I am under contract to buy a rental and I've been having a heck of time with lenders. I'm curious if anyone has run across an issue with "concessions" paid by the seller. My initial offer was $85,000 and the seller pays closing costs. The seller countered the offer with $85,000 cash to him, but he would be willing to pay up to $3,000 in closing costs making the loan based on a sale price of $88,000.
Today, the lender (conventional) informed me that under Freddie Mac and Fannie Mae laws, the seller is not allowed to pay more than 2% of the loan amount for concessions....since $3,000 is more than 2% of what an 80% LTV loan is ($70,400 loan), I would have to come up with an additional $1,200 out of pocket up front at closing to pay closing costs reducing the amount of the loan to a little more than $69,000 (and taking money out of my pocket for rehab). I know it isn't much money - but in essence, the seller would be getting more cash out of the deal than he agreed to which isn't in keeping with the spirit of the deal....and there goes part of the budget for replacing appliances that need to be replaced under rehab.
Anyone else run across this? Essentially, I feel I've been a bit deceived. I've asked the agent to go back to the seller and re-consider the offer/contract. I'm a bit upset that a real estate agent "wouldn't know this" or disclose this up front.