What Are Seller Contributions Towards The Buyer’s Closing Costs?

MN Real Estate Closing Costs

Whether you’re buying or selling a condo or a home in Minneapolis, St Paul or the surrounding suburbs, you’ll want to know what are the seller contributions towards the buyer’s closing costs.  These contributions can be a powerful incentive for selling a property because closing costs can add up very quickly. In some cases, closing costs can be between 3% and 6% of the purchase price.

How It Works

Once the buyer and seller agree to the sale price, the buyer may ask the seller to contribute toward closing costs. The sales price may be increased by a certain amount, which offsets the closing costs to be paid by the seller. An written agreement is prepared to make the arrangement official.

Limitations to Contribution Amounts

Depending on the type of mortgage loan, there are limitations to how much a seller can contribute toward the buyer’s closing costs. For example, with an FHA loan and a minimum 3.5% down payment, the seller can contribute up to 6%. With a VA loan, the seller can contribute up to 4%.

What Kinds of Closing Costs Can Sellers Pay?

Allowable seller contributions towards the buyer’s closing costs will vary somewhat depending on the type of loan. Typically, these allowable closing costs will include:

  • Title service fees (title searches, title examinations, etc.)
  • Lender’s title insurance
  • Owner’s title insurance
  • Mortgage rate discount points
  • Prepaids
  • Debt and/or judgment payoff (with VA loans)
  • Funding Fee (for VA loans)

Certain expenses are generally excluded from the seller’s contributions for closing costs, depending on the type of mortgage loan.

RE/MAX Results
Shannon Lindstrom, Realtor®, AHWD, NCS
Direct: 612-616-9714

Is Twin Cities Condo Living Right for You? What Will The Association Fee Cover

Minneapolis Condos

Minneapolis/St. Paul condos & lofts may be an excellent living choice for first time buyers making the leap from a rental unit, empty nesters or individuals looking to downsize, or seeking a second dwelling.

Residents within condos or lofts buy the individual unit in which they will live, up to the walls themselves. The remainder of the building is considered shared living space. Most (if not all) of the condo building maintenance will be covered by an association funded by monthly fees which are paid by every owner in the complex. Fees typically cover maintenance expenses within common interest spaces, such as stairwells, roofs, decks and more as well as amenities such as pools, garden areas, exercise rooms, etc. Additional expenses such as management fees, insurance expenses, utility usage within each unit and grounds keeper salaries are may be included in the monthly fee, which is commonly based on the size of the unit or it may be a fixed amount. 

Is Condominium Living Right for Me?

Condominium associations do provide living restrictions within the units; you will have to abide by whatever rules are in place for pets, visitors, laundry, colors of paint on exterior doors, etc. If, however, you are looking for a great Downtown St. Paul/Minneapolis urban living situation and are comfortable with the association rules, you may appreciate the ability to go about your life free from the hassles of building maintenance. In most cases, your utilities and outside hazard insurance expenses will be included in your monthly association fee, which also covers maintenance of all common interest (shared amenities) aspects the building, such as roof top gardens, indoor and/or outdoor pools, exercise and entertainment rooms and beyond. 

Most Association Fees Based on Square Footage of Your Unit

In some cases, the monthly condominium association fees are based on the square footage of the unit. This is logical when you consider that larger units generally have a higher utility usage and house a greater number of people who use amenities within the building. Also, if any major building renovations or repairs must be undertaken, larger units occupy a greater percentage of the space, leading to proportionally higher fees. The original developer of the condo determines whether different units pay different rates; some do utilize a flat fee for all owners. Once the developer has completed their role in the project, however, the association itself is free to change the rules of the organization. Working closely with your Minneapolis/St. Paul Condo Realtor will help you select the perfect living situation that meets all of your needs at a price you can afford.  

Buying A New Home or a Condo in Minneapolis-St Paul

MInneapolis St Paul New Home

Finding the perfect home or condo/loft can be a dream come true, but the locating your ideal one and owning may take effort. However, the vision of urban living in Minneapolis or St Paul and owning a condo/loft or a single-family home can potentially in your near future.

Please see below some quick tips to consider for Twin Cities first-time homebuyers when you are looking to purchase a new home or a condo.

Preparing Finances:

When it comes to buying a home, the most important thing to know is how much you can afford. There are various tools and mortgage calculators online to help determine the debt and expenses that one can afford basis their annual income. Preparing for mortgage finance is not just restricted to the purchase price of the house or condo. Additional costs will need to be factored in such as; property taxes, homeowner’s insurance, and energy utilities. If you wish to purchase a condo or a loft, you will also need to consider the monthly condo association fees to your overall monthly budget.

Getting mortgage pre-approved with a lender initiates the mortgage process and helps you to move forward in the process of starting your journey of house-hunting. Look at a few home or condo options online or take a drive in your locations of interest. Create a list of what you need in a home – number of rooms, location, amenities etc. Based on this, meet with a real estate agent to discuss the home-buying process and also your home search options.  

During this process, you will view homes with your real estate agent, which may help pertaining to what type of home or condo that you will fit your needs and wants. The City of Minneapolis & St Paul require homeowners to have a city inspection performed prior to listing the home or condo for sale. The City of Minneapolis or St Paul Truth In Housing Report outlines the property code violations. You can find a copy of the report on the city website.

Once you start the process of putting in an offer on a property, you may want to consider a private home inspection contingency. The inspector expert will inspect the property for the purpose of identifying any electrical, plumbing or structural issues. The private home inspection can take anywhere from 2-4 hours.

Down-payment programs:

The governments in Twin Cities also assists new buyers in a big way. It helps in connecting one-on-one to Homeownership advisors who are unbiased, non-profit experts who provide free consultation. You will find some first-time homebuyer programs will require individuals to attend low-cost, home buyer education course from Home stretch or Framework which are available in many languages. Based on the buyer’s income levels, down-payment and closing cost assistance is also provided to new buyers making affordable housing a reality. Details for this can be availed from the Housing Resource Center which lenders are aware of.

Housing finance agencies like Minnesota Housing Finance Agency also offer mortgage loans with affordable interest rates to first time buyers. It is worthwhile also knowing all options provided in mortgage financing. The Homeownership Works program (HOW) supports low income home buyers using federal funds. Options on affordable ownership, down payment and closing costs for military people is given by Homes for Heroes program.  

If you need down-payment assistance and qualify, you may want to utilize the Minnesota Housing Finance Agency programs or Minneapolis-St Paul neighbourhood down-payment assistance programs.

If you are looking to purchase a single-family home or a condo/loft in the Minneapolis-St Paul area, please feel free to contact me.

Minnesota Homeowner Center

Minnesota Housing Finance Agency

Homes For Heroes

RE/MAX Results
Shannon Lindstrom, Realtor®, AHWD, GREEN, NCS
13784 83rd Way No, Ste. 200
Maple Grove, MN 55369
Direct: 612-616-9714