3rd Party Contributions and LARGE deposits

Close more loans with Motive Lending! I keep a pile of inbound questions that come up over time and then I typically inform my network of these most recently asked guideline questions.

Sellers concessions or “Third party contributions” and the subject of “LARGE DEPOSITS” comes to the surface in the past month. Below is a cheat sheet on both;

Seller Concession Limits; FHA loans the max is 6% Seller Contributions. Conventional is a different story, and it depends on LTV. So Owner Occupied LTV > 90% the max is 3% Contributions. Owner Occupied or Second Home at 90 LTV or less the max is 6% Contributions. Owner Occupied or Second Home at 75% LTV or less the max is 9% Contributions. Now any occupancy type on anything for sale by owner the max is 2%. The max Contributions for any investment home transaction is 2%.

Large Deposit Clarification; FHA loan guidelines say that the large deposit would be considered a percentage of the purchase price. 1% of the purchase price or more is considered a large deposit an would need to be verified and sourced. Conventional loan guidelines define large deposits based on what the qualifying income is on the deal. On a refinance it is 20% or more of the qualifying income needs to be sourced as a large deposit. On a purchase it is 50% of the qualifying income or more as a deposit on bank statements that would need to be sourced and verified.

As we roll right into purchase season these are great guidelines to know! Happy Originations, and look forward to helping you. – JUICEMAN

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