Lender imposed limit on credits from seller??

Question

I have never heard of this, neither has my agent...

Long story short - seller had agreed during inspection period to do some repairs and he has not.  Sale was actually scheduled to close today - and I agreed to a credit of $2000 in lieu of certain repairs.

However, today - my lender through a curve ball and stated that I can not have more than $1,000 (approximately 2% of purchase price) as credits from the seller on my settlement statement - or my loan can't be funded.

Has anyone heard of that before?  Have any ideas for a creative work around?  Seller apparently has zero cash and the $2000 credit was going to be ALL of his proceeds from the sale.

A little stumpted... mostly frustrated.  Any insight is appreciated!  Thanks!

Ben Reiss · Answer

Yeah, I ran into that before, Non-OO is always capped at 2% from what I've read(and run into). FHA can go up to I think 6% and some OO can still go around 4%. depends on the bank. I think it is usually between 1% and max of 6%. I don't think you are ever allowed to get more than that even on an OO loan.

Can you have a seller carry back? maybe you could get the seller to hold a "note" for the 2K off purchase price and then hand you something clearing it at closing? I have no idea if this would work. but it's about the only way I can think of other than Wayne's idea of escrow-ing the money for repairs. then it is technically not going to you but to hold for agreed repairs.
   
   Other option is to get a note from seller for cost of repairs and collect from his $2,000 proceeds of the sale (if there will be any).

Wayne Brooks · Answer

Having the $2k escrowed, then released to you after repairs are made, may satisfy the underwriter.

Carlos Flores · Answer

Too small to worry about.  Tell seller to drop the sales price by $1k and give you $1k credit and move on.