Athen Apaquette

Can a seller credit for a buyer on a FHA loan go towards recurring and non-recurring closing costs?

8747138_mYes, a seller can pay up to 6% of the sales price for both recurring and non-recurring closing costs.

Recurring costs are also called pre-paids. They include taxes, insurance, and interest.

Non-recurring costs do not repeat unless there is a new transaction. They are the “hard costs” such as title fees, escrow fees, notary, up-front mortgage insurance premium, county fees, and all costs that are related to the transaction.

Also, the differentiation of “allowable versus non-allowable buyer charges,” with FHA and VA, have pretty much disappeared.

On Fannie Mae and Freddie Mac the credit from a seller depends on the down payment. This is 3% from the seller for 3% to 9.9% down, and a 6% credit if the buyer has 10% down or more.

Please note that the seller can only pay 2% credit if the buyer has purchased the property as an investment.

So when in doubt check with your lender.