How Much Are Buyers Benefiting From FHA's Six Percent Guideline?
When buying a home in Atlanta GA, buyers who use FHA financing can have the seller contribute up to six percent of the purchase price towards their closing costs. Buyers closing costs include items like loan origination charge, credit report fee, appraisal fee, daily interest charges, attorney's fees, title insurance, and escrow for property taxes and homeowner insurance. These items add up, and sometimes take buyers by surprise when the lender reports cash they need to bring to closing.
FHA insured mortgages allow sellers who contract with Atlanta GA buyers to contribute up to six percent of the purchase price to cover those buyer closing costs. A six percent contribution is more than enough to take care of the vast majority of buyer's closing costs. The buyer will only have to be sure to have the down payment (which is a minimum of 3.5% now) saved and available for verification by a loan officer.
Recently I began to wonder just how many Atlanta buyers have had the total six percent contribution applied to their transaction. I surveyed several of lender resources and took a review of my own 2011 transactions. Below is a summary of the what I found:
- When buying a foreclosure or short sale (much of the market sales), no Atlanta GA buyers received the full six percent contribution. The most an Atlanta GA buyer received was 3.5% when purchasing a Fannie Mae foreclosure.
- When buying a traditional resale, an investor owned or builder owned property, about 50% of the buyers received a seller contribution beyond 3%. Less than 1% getting the full six percent. Most Atlanta GA buyers had all of the closing costs covered at five percent seller contribution.
- Atlanta GA buyers who purchased properties via a neighborhood stabilization program, Atlanta Beltline, or similar income restrictive programs, received the most assistance with closing costs and in many cases down payment.
So the conclusion for Atlanta GA buyers using FHA financing is check out housing offered by an income restrictive program to get maximum contribution towards closing costs and down payment assistance. For Atlanta GA buyers whose incomes are beyond guidelines should first look for homes that are traditional resales, investor owned, or builder owned. And since much of the available listings are foreclosure or short sale property, be prepared to have funds available to pay for a portion of the closing costs in Atlanta GA. Buyers, also understand three percent contribution is the norm (not the rule or law) in Atlanta GA. The six percent guideline is a great idea but in practice very rarely used.
For more information on buying or selling real estate in Atlanta GA, please call 404 246 3210.
NOTE: All information is deemed reliable but not guaranteed.
Office 404-418-8092 Cell 404-246-3210 Fax 404-991-3770