If the combined amount of cash required is more than a buyer is comfortable with, then they may attempt to negotiate a seller credit for some or all of the closing costs.
For example: a sales price of $400,000 with no seller credit is materially similar to a sales price of $410,000 with a $10,000 seller credit. Your mortgage payment is slightly more because the sales price is higher, but you are able to reduce your cash to close required.
There are maximums to the seller credits, and the caps depend on your loan program and down payment amount. Please note – the seller credit can never exceed the closing costs!
Conforming Financing: (Primary and Secondary residences)
Less than 10% down: 3% Seller Credit cap
10%-25% down: 6% Seller Credit cap
25%+ down: 9% Seller Credit cap
Investment property purchase with any level of down payment: 2% Seller Credit cap
FHA Financing: 6% Seller Credit cap
VA Financing: All closing costs may be covered
Jumbo Financing: 3-6% Seller Credit cap for primary or secondary residence (depending on buyer’s finances and loan product), or 2% for investment property