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Frequently Asked Questions (FAQs)

Federal and State Disclosures

Loan Programs

UP2 Using a seller concession.

Under Fannie Mae and Freddie Mac guidelines the seller in a purchase transaction can pay all or a portion of the buyer’s closing costs and pre-paid items (e.g. initial homeowner’s insurance premium).  This payment of costs, shown as a lump sum payment on the settlement statement at closing, is typically referred to as a “seller concession” or a “seller contribution”.

The seller concession can be as high as 6% of the purchase price on the purchase of a primary residence (3% of the purchase price where the down payment is less than 10%).

Utilizing a seller concession is an important strategic move for applicants seeking to minimize the amount of cash they are required to bring to closing. In a transaction with 5% down, the use of the seller concession can enable the buyer to limit the cash required at closing to no more than the 5% down payment, using the concession to cover the remainder of closing costs and prepaids.

Even more importantly, by utilizing a seller concession a buyer can more easily utilize single premium mortgage insurance without requiring higher cash paid at closing or an increase in the interest rate to compensate for the mortgage insurance premium paid at the closing.

A buyer must take care not to negotiate a seller concession that is higher than the amount of closing costs and pre-paids.  Your AmeriFund loan consultant can consult with you or your agent prior to making an offer on a home to assure that a seller concession in an amount that is best formulated for your requirements is requested in the offer.