Yes, the seller can pay your closing costs, and in Florida it's one of the most common terms in a first-time buyer's offer. The seller agrees to a credit in the contract, and at closing that money pays your lender, title and settlement fees, Florida's taxes on the loan, and your prepaids. Each program caps how much the seller can give, and none of them let a seller credit pay the down payment.
How much the seller can pay
| Program | Seller credit limit | What it can pay |
|---|---|---|
| FHA | 6% of the price | Closing costs, prepaids, discount points, the upfront mortgage insurance premium |
| VA | All normal closing costs, plus up to 4% of the reasonable value in concessions | Concessions can pay the funding fee, prepaid taxes and insurance, and payoff of your debts |
| Conventional, less than 10% down | 3% | Closing costs and prepaids |
| Conventional, 10% up to 25% down | 6% | Closing costs and prepaids |
| Conventional, 25% or more down | 9% | Closing costs and prepaids |
| USDA | 6% of the price | Closing costs, prepaids, discount points |
Fannie Mae measures its cap against the lower of the price or the appraised value. VA is the most generous of the four, because VA doesn't limit seller credits for normal closing costs and caps only the extra concessions at 4%.
A worked example on a $325,000 home
Jasmine is buying a $325,000 single-family home with FHA, 3.5% down, at a 5.75% rate. Property tax runs 0.95% a year, and homeowners insurance is $283 a month. Her loan is $319,113.44, which includes the 1.75% upfront mortgage insurance premium.
| Closing costs and prepaids | Amount |
|---|---|
| Lender, appraisal, title, settlement and recording fees (estimate) | $5,800.00 |
| Florida doc stamps on the note ($0.35 per $100) | $1,117.20 |
| Florida intangible tax (0.2%) | $638.23 |
| First year of homeowners insurance | $3,396.00 |
| Opening escrow deposit (3 months of taxes, 2 of insurance) | $1,337.88 |
| Prepaid interest (15 days) | $754.07 |
| Total | $13,043.38 |
That's 4.0% of the price, and FHA's cap is 6%, or $19,500. Jasmine writes a $13,043.38 seller credit into the contract, and her cash to close drops to the $11,375 down payment, with her earnest money counting toward it. With FHA 100% financing covering the down payment too, she would bring close to nothing.
The same price on a Conventional loan with 3% down caps the seller at 3%, or $9,750, so a Conventional buyer covers the rest with savings or a gift.
Asking the seller without losing the house
A seller who nets less from a credit may push back. One common answer is to raise the offer by the amount of the credit. If Jasmine offered $335,000 and asked for $10,000 back, the seller nets about the same, and her FHA payment rises by $69.64 a month, from $2,546.30 to $2,615.94. The home has to appraise at $335,000 for that to work, since the loan is based on the lower of the price or the appraised value. If it comes in low, the low appraisal page covers the options.
A few rules apply on every program:
- The credit can't exceed your actual closing costs and prepaids, and any extra doesn't come back as cash.
- The credit has to be written into the purchase contract.
- Florida's property tax proration, the seller's share of the current year's taxes, is credited to you separately and doesn't count against the cap.
If the credit isn't enough
- Pick a loan with a bigger cap. FHA and USDA allow 6%, and VA allows normal costs plus 4%, versus 3% on Conventional with a small down payment.
- Add a family gift. Gifts can cover whatever the seller credit doesn't.
- Use FHA 100% financing. The down payment assistance second covers the 3.5%, so the seller credit only has to handle closing costs.
Plug your price and the credit you plan to ask for into the cash to close calculator before you write the offer. AAA Capital Funding will give you the exact dollar figure to put in the contract on a call to 888-601-8344, so you ask for enough to cover your costs and no more than the loan can use.