Down Payment Assistance From The Seller

Mark Hewitson • Oct 26, 2021

What Is Down Payment Assistance From The Seller?

I've been working with a buyer, that sends me the address of a home that they like and then askes me, "will they offer down payment assistance".  It got me thinking about how many other buyers don't understant what down payment assistance is.  

There are different types of down payment assistance

- There are various programs that state and local governments offer.  These programs come and go, some you have to payback, and some you don't.  Some require you to stay in the home a certain lengh of time, so do not.  The best thing to do is to talk to your professional Realtor and or lender and see if they are aware of any local programs.  

- There are down payment assistance programs that lenders offer.  Again, this will vary lender by lender, but be aware that nothing is FREE (ok, unless it's a grant, we'll disuss that another day).  The lenders, in most cases will get their money back, normally with a little higher interest rate. 

- Another way to get down payment assistance is from the seller, we also call this sellers help.  Basically what you are doing is asking the seller to give you money back at settlement to help you be able to purchase their home. 

For example, if the house is listed for $150,000 and the you offer $150,000 with 3% sellers help, that would mean at settlement the seller is giving you $4,500 “down payment assistance”, so they are making $145,500 instead of $150,000.  

FHA will allow up to 6% sellers help, but most sellers do not want to give that kind of money back to the buyer, especially as aggressive as the market has been. So the norm is 3%. (6% of $150,000 is $9,000, that's a lot of money, especially if the seller owes $142,000 to the bank.)

So first, each seller, every house is case by case. there is no way of knowing if the seller will give you “down payment assistance” until we actually make an offer on a house. 

 There are things that we can do to make it easier for the seller to give you sellers help. 

In the $150,000 example, you could offer $154,500 with $4,500 “down payment assistance”. 

If you offer above list price, you as the buyer, would need to be comfortable paying that much for the house,  Then the bank will need to appraise the home for the higher price (that can be tricky as well).

As you can see, there are a lot of moving parts when buying a home and trying to negoiate "down payment assistance".  This is just the tip of the iceburg and a pretty simple example.  You as a buyer will need to make some educated guesses, many decisions and a whole lot of emotions and stress. My job is to try and reduce that stress. 

You want to make sure your Professional Realtor and Lender have the experience, skills and knowledge to help you negotiate the best deal possible for you

The market is starting to slow down a little, that is great news for the buyers, not such good news for the sellers.  One of my favorite quotes for home buyers is, "you don't make money when you sell your home....  you make money when you buy your home. "  We at Maryland Real Estate Professionals want to make sure that you receive the best deal possible for the home you want, with as little stress as possible.  

Hakuna Matata - It means no worries, for all of your real estate days!

Maryland Real Estate Professionals Real Estate Outlook

By Mark Hewitson 30 Apr, 2024
The Ultimate Relocation Guide: From Finding a House to Feeling at Home
By Mark Hewitson 02 Apr, 2024
27 Practical Tactics for Busy Households
By Mark Hewitson 03 Mar, 2024
Downsize Your Home, Rightsize Your Life: How to Choose the Ideal Smaller Home 
By Mark Hewitson 06 Feb, 2024
Upgrade Your Home With These 2024 Design Trends
By Mark Hewitson 02 Jan, 2024
Real Estate Market Forecast: Opportunities for Home Buyers and Sellers in 2024

By Mark Hewitson 01 Dec, 2023
It's the most wonderful time of the year.

By Mark Hewitson 03 Nov, 2023
Buying a new home is one of the most exciting experiences in life.
By Mark Hewitson 04 Oct, 2023
If the thought of investing your money into brick and mortar—or perhaps some stylishly-painted siding—excites you, join the club.

By Mark Hewitson 05 Sep, 2023
Top 7 Tips To Attract the Best Offers for Your Home
By Mark Hewitson 03 Aug, 2023
To avoid buyer's remorse, be sure to consider your future self when shopping for a home.
More Posts
Share by: