What is the maximum contribution a seller can make to assist an FHA borrower, expressed as a percentage of the property's sale price?

In Federal Housing Administration (FHA) financing, there are established guidelines regarding seller contributions to assist borrowers with their transaction costs. These contributions can cover closing costs, prepaid items, and other related fees. The correct answer, 6%, reflects the maximum percentage of the sale price that a seller can contribute to help an FHA borrower.

This guideline aims to ensure that while sellers can support buyers in obtaining their homes, it also maintains the integrity of the loan structure and limits over-financing concerns. By capping the seller contributions at 6%, it helps to mitigate the risk of inflated property values that might arise from excessive financial contributions that could otherwise be interpreted as reducing the buyer’s actual investment in the property.

Understanding this percentage is crucial for both buyers and sellers involved in FHA transactions, as it directly affects their financial obligations and the structuring of the deal.