Questions about mortgage loan interest rate or down payment? Call us at 813-679-9947 or 720-483-7336
What are the maximum interested party contributions limits?
What Are Seller Concessions or ( IPC's) ?
Seller concessions, also referred to as seller contributions, seller credits, or IPCs (Interested Party Contributions), are a common practice within real estate transactions. These concessions entail a negotiation in which the seller of a property agrees to contribute a specific sum of money or cover particular expenses on behalf of the buyer. These concessions are typically extended to make the deal more enticing to the buyer or to assist the buyer in offsetting some of the upfront costs associated with home acquisition.
Here are several prevalent forms of seller concessions in real estate:
1. Closing Cost Assistance: Among the most frequently encountered forms of seller concessions, this involves the seller consenting to pay a portion or the entirety of the buyer's closing costs. Closing costs encompass expenses like title insurance, appraisal fees, lender charges, and property taxes. By assuming these costs, the seller alleviates the financial load on the buyer during the closing process.
2. Repair Credits: In certain situations, the seller may propose to address specific repairs or enhancements to the property before the closing date or provide the buyer with a credit. This credit allows the buyer to carry out these repairs themselves after the sale, which can be especially beneficial when addressing minor property issues.
3. Reduced Purchase Price: Instead of offering cash credits, the seller might consent to a reduction in the overall purchase price of the property. This indirectly benefits the buyer by lowering the mortgage amount and potentially reducing the requisite down payment.
4. Home Warranty: The seller may opt to procure a home warranty for the buyer. This is essentially a service contract that covers the repair or replacement of specific home systems and appliances for a set duration, typically one year. This offers the buyer peace of mind regarding potential repair expenses after moving into the property.
5. Property Tax Credits: In some scenarios, sellers may volunteer to cover a portion of the property taxes for a specified period, often until the conclusion of the current tax year. This can help alleviate the buyer's financial obligations in the short term.
It is crucial to recognize that seller concessions are typically open to negotiation and can vary based on factors such as prevailing real estate market conditions, the characteristics of the specific property, and the motivations of both the buyer and seller.
Moreover, the maximum seller concessions allowed often depend on the type of mortgage being used. Here are the maximum seller concessions for common mortgage types:
CONVENTIONAL LOANS:
- Principal Residence or Second Homes
- Loan-to-value greater than 90%: Max Concession 3%
- Loan-to-value 75.01 - 90%: Max Concession 6%
- Loan-to-value 75% or less: Max Concession 9%
- Investment Property (Any loan-to-value): Max Concession 2%
FHA LOANS (Any loan-to-value): Max Concession 6%
VA LOANS (Any loan-to-value): Max Concession 4%
USDA LOANS (Any loan-to-value): Max Concession 6%
Additionally, it's important to consider some rules when utilizing seller concessions:
- The seller concession must not exceed the buyer's closing costs, and cash-back is not allowed.
- The adjusted sales price, which includes the concession, must be supported by the home appraisal; if the appraisal is too low, the seller concession may be declined.
- For VA loans, the seller concession may be allowed to exceed the 4% limit since certain closing costs are not covered by that rule.
- For USDA loans, the 6% seller concession limit is calculated based on the buyer's loan amount rather than the sale price or appraised value.
These rules and limits may change over time, so it's advisable to consult with a knowledgeable real estate professional or lender for the most current information regarding seller concessions and their application.
Collaborating with a seasoned real estate agent offers substantial benefits. These professionals possess deep insights into the local property market, coupled with extensive negotiation expertise. They can furnish you with valuable information on prevailing market conditions, recent sales figures, and examples of similar properties that have been sold with concessions. This data empowers you to bolster your negotiation stance and make well-informed choices. If you're interested in finding a top-notch realtor in our network, we encourage you to reach out at 813-679-9947 today.
Mortgage Rates
Additional Information
Looking for the best mortgage rates in Tampa Florida? Look no further than Newton Financial Home Loans! Our team of experienced mortgage professionals is dedicated to helping you find the right mortgage product to fit your needs and budget.
We offer a wide range of mortgage options, including fixed-rate mortgages, adjustable-rate mortgages, FHA loans, VA loans, and more. Our competitive rates and flexible terms make it easy to find the perfect mortgage for your unique situation.
At Newton Financial Home Loans, we understand that buying a home can be a complex and daunting process. That's why we're committed to providing personalized service and guidance every step of the way. From pre-qualification to closing, our team will be with you every step of the way.
So if you're ready to take the first step towards homeownership, contact Newton Financial Home Loans today! Our experienced mortgage professionals are standing by to answer your questions and help you find the best mortgage rates in Tampa Florida
