How to persuade a seller to pay for closing cost?

Question

Hi,

I am a first time buyer under a FHA loan for a $350,000 home; down payment of 3.5%.

I’m a little nervous, while raising capital, if the seller will cover my closing cost. I am currently saving capital under the guise of the seller not helping. Is this the right way to think or will a seller almost 100% of the time cover this cost?

Russell Brazil · Answer

Increase the sales price and ask for the increase back as a closing cost subsidy keeping the net to the seller the same.

Jaysen Medhurst · Answer

This is really market dependent, @Brandon Shepherd. Be sure of this, almost 100% of the time the seller will NOT cover your closing costs. They're already giving up 6-9% in the transaction and aren't going to pay more, if they don't have to. In a buyer's market, maybe. Doesn't hurt to ask, but know that a FHA mortgage is already a relatively weak offer and you don't want to push your luck.

BTW: if you can qualify for a conventional loan instead of FHA, do that. Less paperwork, no up-front PMI, and monthly PMI drops once you hit 78-80%.

Melanie Marie Trinh · Answer

@Brandon Shepherd , I would have your realtor/lender propose that in exchange for seller credits, that the loan can close faster. So this depends on whether your lender is able to do that. We can close in 14 days or less and realtors/sellers love that when we are negotiating for seller credits.

Jaysen Medhurst · Answer

@Brandon Shepherd, FHA is really the "mortgage of last resort." Especially now with tightening lending standards the spread between a "standard" offer and a FHA one is wide. For example:

• Many "conventional" lenders require a credit score of 700+ and 20% down. FHA will back loans to borrowers with credit scores as low as 500 and a little as 3.5% down.
• Most lenders require 2+ years of employment history. FHA only requires "steady employment."
• All things being equal, FHA allows higher DTI than traditional lenders, as high as 56.9% under some circumstances.
• FHA borrowers are much less likely to have ready capital. So they are less prepared to deal with anything unexpected that comes up during the selling process.

All of these factors add up to significantly more risk that a buyer utilizing a FHA mortgage will be unable to close. That's what makes FHA offers the weakest.

Brandon Shepherd · Answer

@Russell Brazil so are you hypothetically saying to increase the sales price up $20,000 and in turn request the $20,000 up tick back in closing?

Brandon Shepherd · Answer

@Jaysen Medhurst I can tell you w a A wealth of knowledge. Can you explain why an FHA loan is a weak offer?

How to persuade a seller to pay for closing cost?

How to persuade a seller to pay for closing cost?

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