FHA Financing

Seller Concession — Many home buyers with limited funds seek the seller’s assistance with closing costs. This is especially true for those securing FHA loans. Typically on an FHA loan the borrower must contribute 3% of his/her own funds into the loan, this can be a gift from a family member and does not necessarily need to be applied to the down payment, it may be applied towards closing costs or pre-paid items.

The typical seller’s concession on an FHA loan is 6% , however, on a conventional loan with less than 10% down the seller concession in most cases is no more than 3%. Other factors such as credit scores and loan program guidelines would determine the exact amount allowed.

FHA Loans | Understanding Terms

What is a loan to value?

The loan-to-value (LTV) is the original loan
Amount divided by the lower of the sales price or the appraised value. It is calculated for each loan, and the results determine which rates apply to that loan. Mortgage insurance rates are reduced for each lower LTV category, reflecting a smaller default risk when a borrower has made a larger down payment.