FHA Plans to Lower Seller Concessions This Summer
The Federal Housing Administration, which currently offers one of the most popular types of home loans (FHA), is changing one of its most celebrated aspects this summer, at least that’s what the rumor is. The aspect I am referring to is the maximum amount of allowable seller concessions, which permit property owners to pay for some of the services and fees connected with the loan transaction. Inspections, origination, escrow and title fees are just a few of the costs that can be paid via seller concessions, and the new change is expected to receive some backlash as the summer progresses.
HOW LOW CAN THEY GO?
The amount of the rumored change would drop the allowable amount of seller concessions from 6% of the sales price down to 3%, which is still enough to cover all the closing costs on a loan of approximately $250,000, but anything less than this will force buyers to pay at least some of their costs out of pocket.
WHY WOULD THEY DO SUCH A THING?
The FHA is making this change in an effort to protect the value of the homes it has loans on. When a seller agrees to pay concessions and closing costs, they are really inflating the sales price (and loan amount) on the property to cover these amounts. If the home in questions doesn’t end up appraising for the inflated value you are then going to start running into problems. Furthermore, by lowering the percentage of allowable seller concessions, the FHA is really attempting to lower their overall risk at the same time.
WHEN DOES IT HAPPEN?
In its most recent Register Notice, the FHA said that the proposed change would likely occur by “early summer” although FHA spokesman Lemar C. Wooley recently backtracked and confirmed that there had been no official Federal Register announcement as of yet. So is it just a bunch of rumors? Possibly, but obviously we will keep you updated as we come across any new information.
If you have any questions about seller concessions or the home buying process in general, don’t hesitate to CONTACT US and we will get back to you as soon as possible. You can also FILL OUT THIS FORM and one of our loan officers will review your situation and see if we can help you out. 
2 Comments for this entry
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July 2nd, 2010 on 9:23 pm