What Sellers Cannot And Should Not Do
May 27, 2019
FHA home loans have rules, and house sellers in general have to obey certain federal laws. The gist of this is that when you buy a home with an FHA mortgage there are things the seller cannot do.
What are these issues? Some of them have to do with FHA loan program restrictions, others have to do with Fair Housing laws, and some are just plain common sense things no borrower should ever put up with from a seller.
FHA Loan Rules: Seller Contributions
By law, the seller is not permitted to contribute toward a borrower’s down payment. Seller contributions for closing costs are allowed under FHA loan rules, but these contributions cannot exceed six percent of the asking price.
In cases where the seller’s contributions do exceed six percent, the lender is required to make a dollar-for-dollar reduction in the loan amount that corresponds with the amount in excess of the six percent rule. That means your loan amount gets lowered and you may pay more out of pocket for the loan.
Common Sense: When the Seller Offers You Money to Forego a Home Inspection
It is not a common problem, but you will read horror stories of buyers who were offered money by sellers to skip the home inspection. Do not do this. Skipping the home inspection means not making a fully informed decision about the home you are buying. The FHA and HUD official site publishes a pamphlet called “For Your Protection, Get A Home Inspection” and there is a very good reason for that.
Fair Housing Laws: Refusing to Sell
It is illegal for a house seller to refuse to sell a property to another person based on a variety of factors the official site of the American Bar Association describes as “based on race, religion, gender, color, or national origin. In some localities, special housing discrimination ordinances or laws also cover sexual orientation.”
The American Bar Association adds that Fair Housing laws do not require a seller to sell you the property; “It means that you could take legal action if the seller refuses to sell and you believe it was due to discrimination”.
Ask your loan officer or real estate agent if you are not sure how these rules and common sense guidelines apply to your transaction.
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RELATED VIDEOS:
Understand the Reasons for Private Mortgage Insurance
Carefully Read Your Closing Disclosure
Buying a Home With a Co-Borrower
What are these issues? Some of them have to do with FHA loan program restrictions, others have to do with Fair Housing laws, and some are just plain common sense things no borrower should ever put up with from a seller.
FHA Loan Rules: Seller Contributions
By law, the seller is not permitted to contribute toward a borrower’s down payment. Seller contributions for closing costs are allowed under FHA loan rules, but these contributions cannot exceed six percent of the asking price.
In cases where the seller’s contributions do exceed six percent, the lender is required to make a dollar-for-dollar reduction in the loan amount that corresponds with the amount in excess of the six percent rule. That means your loan amount gets lowered and you may pay more out of pocket for the loan.
Common Sense: When the Seller Offers You Money to Forego a Home Inspection
It is not a common problem, but you will read horror stories of buyers who were offered money by sellers to skip the home inspection. Do not do this. Skipping the home inspection means not making a fully informed decision about the home you are buying. The FHA and HUD official site publishes a pamphlet called “For Your Protection, Get A Home Inspection” and there is a very good reason for that.
Fair Housing Laws: Refusing to Sell
It is illegal for a house seller to refuse to sell a property to another person based on a variety of factors the official site of the American Bar Association describes as “based on race, religion, gender, color, or national origin. In some localities, special housing discrimination ordinances or laws also cover sexual orientation.”
The American Bar Association adds that Fair Housing laws do not require a seller to sell you the property; “It means that you could take legal action if the seller refuses to sell and you believe it was due to discrimination”.
Ask your loan officer or real estate agent if you are not sure how these rules and common sense guidelines apply to your transaction.
------------------------------
RELATED VIDEOS:
Understand the Reasons for Private Mortgage Insurance
Carefully Read Your Closing Disclosure
Buying a Home With a Co-Borrower
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