What Fees Does the Seller Have When Selling to Someone With an FHA Mortgage?


When you buy a home with a loan backed by the Federal Housing Administration, the seller technically only has to pay fees related to her own mortgage and taxes. However, under FHA rules you can negotiate to have the seller pay some of your closing costs. Many buyers view this provision as one of the main benefits of an FHA-backed loan, but the seller has no actual obligation to agree to pay any of your costs.

Seller Costs

You cannot sell your home unless you pay off any existing liens on the property. As the seller, during the loan closing you must use some of the sale proceeds to settle your own mortgage debt. Additionally, you must pay property taxes for the portion of the year that you owned the home unless you happen to sell the home on the day that property taxes are due. The other costs, such as the document preparation fees and recording costs, are the responsibility of the buyer rather than the seller.

Seller Concession

Under FHA rules, you can make a seller's concession to cover the buyer's closing costs for an amount equal to 6 percent of the property price. The buyer's closing costs include property tax, homeowner's insurance, the FHA mortgage insurance premium, recording costs and attorney fees. The buyer can also use the money to cover the 1 percent origination fee that many lenders charge as standard on FHA loans. If the buyer bought down the interest rate by paying discount points, your concession can also cover that cost.

Seller Benefits

You may feel that the buyer should pay the closing costs and that paying those costs does not benefit you. However, FHA loans involve low down payments and many people obtain these loans because they lack the cash to cover the typical upfront cost of buying a home. You can negotiate the closing cost concession into the sale price of your home so that you do not really pay the costs out of pocket. You could sell your home for $100,000 and pay no closing costs or you could sell the home for $106,000 and pay the buyer's closing costs but effectively pay nothing out of pocket yourself.

Other Considerations

FHA appraisals are more in depth than regular home appraisals and like home inspections, FHA appraisals involve the appraiser drawing up a list of defects and safety hazards in your home. The FHA does not allow purchases to conclude until safety issues have been addressed, and the seller as the owner of the home has to cover the cost involved. Repair costs are not closing costs but do add to your home selling expenses. You can attempt to increase the asking price on account of the repair costs but as with the seller's concession, both parties must agree to such a deal and the buyer may refuse to raise the purchase price.

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