I'm representing a buyer on a short sale. Sellers loan is FHA through Bank of America.

Are there special processes for FHA loans going through short sale regarding how much is allowed in seller paid closing costs for buyer? I heard only 1% toward buyer closing costs will be allowed.

Any insight on that? TIA!

All the bank looks at is the Net of the deal. So as long as they net what they are looking for out of the property then you are good.

Some banks will pay closing costs for the buyer and others won't. Some will pay them some of the time but not others. It all depends on the negotiator and getting that magic net number.

Isn't the seller broke? Hence the short sale? And by the way, if your buyers literally have no money and can't pay their own closing costs, you should be advising them to rent. They have no business buying a home.

Thanks for the posts, Guru & Navarac!

Below is the info I was looking for. I rec'd it in an email:

"HUD ABSOLUTELY WILL NOT ALLOW any seller paid buyer closing costs if the buyer is receiving conventional financing to purchase short sale property where the seller has an FHA loan. IF the buyer is obtaining FHA financing, then FHA will allow a MAX of 1% seller paid buyer closings costs. The buyer cannot "bid up" the purchase price to cover seller concessions on an FHA short sale. HUD simply will NOT allow it. So, any buyer that needs seller concessions over 1% will not be able to purchase an FHA financed home via the short sale."

And I found this from HUD regarding Preforeclosure Sales Program (short sales):

"HUD allows up to 1% of the buyer's mortgage amount for closing costs to be included in the "Seller's Costs" on the HUD-1 for all transactions that involve a new FHA-insured mortgage."

Can anyone elaborate, discuss personal experience or confirm this info?

Thanks again!

Yeah Ive closed a ton of these - In an FHA short sale, you are limited to 1% seller concessions and ONLY IF the buyer is coming in with another FHA loan.
No one else gets anything period, and the 1% is non negotiable.