FHA Set to Reduce Closing Cost Assistance This Summer

The real estate industry is still waiting to see how the market will adjust after the expiration of the first-time homebuyer tax credit, but more consumer incentives are about to be cut, this time from the Federal Housing Administration (FHA). The FHA will reduce allowable seller concessions — the percentage sellers can take from the sales price of a home to fund closing costs — from 6% to 3%. According to an announcement in January, the current level of 6% exposes the FHA to excess risk by creating incentives for appraisers to increase the value of these homes. The change will take place in “early summer,” according to the FHA, but a spokesperson said no specific date has been set. The closing costs include fees for origination, attorneys, appraisal and inspections, title search, title insurance, credit reports, and more. Down payment assistance is not included as a closing cost. Anthony Askowitz, broker and owner of RE/MAX Advance Realty II in Miami, Florida, said the FHA 6% level was also a big incentive to homebuyers looking for reasons to buy a home after the tax credit expired. Askowitz said on a $100,000 house, 6% is $6,000, which is one way of overcoming the tax credit expiration going forward. He said he is seeing some sellers offering an $8,000 credit to new homebuyers, especially for homes that have been on the market for an extended period of time. “I think the seller is going to be much more apt to agree to a seller contribution in order to get it sold. Being creative, there are other ways to do it, other than the government doing it,” Askowitz said. Write to Jon Prior.

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