Yes — in Oregon, a home seller can generally pay some of a buyer’s FHA closing costs, subject to FHA rules that apply nationwide. But there’s an important limit: seller funds can help with allowable closing costs and discount points, but they generally cannot be used for the buyer’s required FHA down payment.
FHA loans are a popular mortgage option among home buyers in Oregon. They’re especially popular among first-time buyers and/or those with limited funds for a down payment. One of the benefits of the FHA loan program is that it allows the seller to contribute money toward the buyer’s closing costs. This kind of “concession” is often made to attract buyers and offers, thereby expediting the sale of the property.
Here’s an overview of the rules and requirements when a seller pays for a buyer’s FHA closing costs in Oregon.
The FHA loan program is managed by the Department of Housing and Urban Development (HUD). So it is HUD that sets the guidelines for seller contributions toward closing costs.
In the Single Family Housing Policy Handbook (HUD Handbook 4000.1) that covers the FHA loan program, it talks about “interested parties.” These are people who are involved with the real estate transaction, but are still allowed to contribute money toward the buyer’s closing costs.
HUD defines an interested party as being: “sellers, real estate agents, builders, developers or other parties with an interest in the transaction.”
The handbook further states that these interested parties can contribute money “toward the Borrower’s origination fees, other closing costs and discount points.” These contributions are generally limited to 6% of the sales price.
So yes, in Oregon a seller can pay some of the home buyer’s closing costs when an FHA loan is being used. But these “interested party contributions” are typically capped at 6% of the purchase price.
A contribution that exceeds 6% would be considered an “inducement to purchase” and would result in a dollar-for-dollar reduction to the purchase price when computing the Adjusted Value. As such, seller contributions that exceed 6% do not happen very often. In most cases, these contributions fall at or below the 6% cap.
In practical terms, seller concessions can usually help reduce the buyer’s cash needed at closing by covering allowable loan and settlement charges. Depending on the transaction, that might include things like origination fees, other closing costs, and discount points allowed under FHA rules.
What they generally cannot do is replace the buyer’s own required minimum investment. In other words, seller-paid FHA concessions may help with cash to close, but they do not satisfy the FHA down payment requirement. That’s the most important distinction for Oregon buyers who are budgeting for a purchase.
If you are planning to ask for seller help, it’s wise to review your estimated closing costs with your lender early so you know which charges may be offset by a concession and which funds you will still need to bring yourself.
Oregon home buyers who use an FHA loan to buy a house must make a down payment of at least 3.5% of the purchase price or appraised value. HUD refers to this as the minimum required investment, or MRI.
The FHA handbook states that “Interested Party Contributions may not be used for the Borrower’s MRI.” And you’ll recall from earlier that the person who is selling the home is considered an interested party.
This means that in Oregon (and nationwide) the seller cannot contribute money to the home buyer’s down payment, when an FHA is used to finance the purchase.
Before asking for seller concessions, think about how competitive the home and offer situation might be. A request for the seller to pay closing costs can make sense, but it can also affect how attractive your offer looks compared to one that asks for fewer concessions.
In a less competitive situation, a seller may be more open to helping with some of the buyer’s FHA closing costs in order to keep the deal moving. In a more competitive situation, asking for too much seller help could weaken your offer, especially if other buyers are offering cleaner terms.
This is where your real estate agent and lender can help. Your agent can advise on how a concession request may affect the strength of your offer, while your lender can help you estimate how much seller assistance you can actually use under FHA rules. Together, they can help you structure a request that supports your budget without making your offer unnecessarily hard for a seller to accept.
Sammamish Mortgage can help. We serve clients across Washington, Idaho, Colorado, Oregon, and California. Since 1992, we’ve been providing several mortgage programs and products with flexible qualification criteria to borrowers across the Pacific Northwest. Visit our website to get an instant rate quote or to use our online mortgage calculator. Or, reach out to us if you are ready to get pre-approved for a mortgage.
Yes. In Oregon, a seller can generally contribute toward a buyer’s FHA closing costs, subject to FHA rules that apply nationwide. Those seller contributions are typically limited to 6% of the home’s sales price.
No. Seller-paid closing costs are optional and must be negotiated as part of the purchase agreement. A seller may agree to help, reduce the amount, or refuse to contribute.
Closing costs on an FHA loan can be paid by the buyer, the seller through negotiated concessions, or a combination of both. Under FHA rules, interested parties may contribute toward certain allowable closing costs and discount points.
Sometimes, but only up to the amount allowed under FHA rules and only for eligible charges. Seller contributions are generally capped at 6% of the purchase price, so whether that covers all closing costs depends on the size of the concession and the buyer’s actual costs.
Seller concessions can generally be used toward the borrower’s origination fees, other closing costs, and discount points allowed under FHA rules. They are meant to reduce the buyer’s cash needed at closing for eligible settlement charges.
No. Seller-paid FHA concessions generally cannot be used for the buyer’s required down payment. HUD states that interested party contributions may not be used for the borrower’s minimum required investment.
FHA generally limits interested party contributions to 6% of the sales price. Amounts above that limit are treated as an inducement to purchase and can trigger a dollar-for-dollar reduction to the purchase price when calculating the adjusted value.
If seller contributions exceed 6% of the sales price, the excess is generally considered an inducement to purchase. Under FHA rules, that can result in a dollar-for-dollar reduction to the purchase price for valuation purposes.
Yes. FHA includes builders, real estate agents, developers, sellers, and other parties with an interest in the transaction as interested parties. Those parties may contribute toward allowable closing costs and discount points, subject to FHA limits.
Seller help with closing costs is often easier to negotiate when market conditions are less competitive and sellers are more motivated to keep a deal moving. In a stronger seller’s market, asking for concessions can make an offer less attractive compared with offers that request less assistance.
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