How much cash can a seller credit to a buyer at closing and how does it work?
Theoretically, sellers can credit as much as they want. If the buyer is getting a new conventional mortgage, however, the lender’s policies about credit-backs will prevail. Most lenders in our area allow the seller to credit back no more than 3% of the purchse price. Depending on the loan program, occasionally they will allow more. Here’s how a credit-back works. A buyer offers to pay $200,000 for the house, and the seller agrees to pay for the buyers’ loan points, which total $6,000 (3%) for instance. At closing, $6,000 would be subtracted from the seller’s sale proceeds and credited to the buyers, which lowers the amount of cash the buyers need to close by $6,000. Most lenders will not allow a buyer to receive cash, in hand, at the closing from a seller. (For repairs, for instance, or towards new furniture) The lender will generally require that any money given by the seller be used for an actual fee or cost associated with the loan.
