Using Seller Financing to Cover Down Payment for FHA Loan

[Michael Fundaro]

Hi All,

I'm negotiating with a seller of a 2 family. My situation is this: I am buying the property with my girlfriend as our primary residence. We have enough money saved to cover the down payment for an FHA 3.5% loan, with another $5K to put towards fees & closing costs. Closing costs will be about $10K, we asked for $9K from the seller to give us some cushion. They countered, keeping the price the same but offering no closing costs. Before asking for $5K back for closing costs, and before offering more to offset the seller credit, I thought about using a seller financed second mortgage to cover the down payment, freeing up our cash to cover all closing costs. The cash flow from the other unit (currently occupied month to month), plus our monthly income is enough to cover costs and the second mortgage. We get our house with more money in our pockets, the seller gets their full asking price (though a portion of it is paid over time).

So what I'm wondering is, what kind of angles can I work to persuade the seller to provide the second mortgage?  I understand negotiating is a very case sensitive subject, but it would be great if anyone could provide examples of what has worked for them in the past.

Thanks!  Also, this is my first post! So double thanks!

Mike

[Sandy Salazar]

ask for seller assist.  What it is you give the seller a higher purchase price, but the difference will go towards your closing cost instead of you paying the closing cost.  I believe fha allows up to 3-6% seller assist. Double check that. So for example let's say you purchase the property at $100,000, you ask the seller for 6% seller assist and offer them $106,000.  The seller will accept it and during escrow when your lender dispenses the money to escrow of $106,000, escrow will give the seller 100,000 and use the 6,000 towards your closing.  You will essentially be financing your closing cost into your loan.  It doesn't effect the seller at all, they still get their purchase price and the paperwork shows its seller assist so they're not paying extra for the $6k. See if that works and if it doesn't some times your lender might give you seller assist.  (Finance your closing costs into your loan) Check with your lender. Good luck!