Seller Paid Closing Costs fall under the category of Interested Party Contributions, and there are specific limits depending on the specifics of the loan. IPCs are costs that are usually the responsibility of the property buyer, but are paid directly or indirectly by someone else. So just who is an Interested Party?
An Interested Party is anyone with a financial interest in the property or who can influence the sale or transfer of the property, and includes people who may benefit from the sale:
- property seller
- builder
- developer
- real estate agent
- real estate broker
Interested Parties can make contributions that pay as much as ALL of the closing costs – but their contribution(s) cannot exceed these % of Purchase Price limits:
IPC contributions cannot go towards anything but closing costs – your down payment MUST come from your own funds…however – you may be able to receive a gift from a family member to help with your down payment, to read more about Gift Funds – click HERE)
In most all cases except for very low purchase prices, the actual closing costs will be the limiting factor.
For a $600,000 purchase price for a primary residence, with 20% down, the IPC % limit would be 6% of the purchase price – which is $36,000. However, the ACTUAL closing costs will be something like $10,000. $10,000 is much lower than $36,000 and so the $10,000 actual closing costs will be the limit.
If there is a Lender Credit – that amount will 1st be applied to your closing costs, and the remaining closing costs will be the maximum you can receive in IPC credits, subject to the % of Purchase Price limitation.