Do you know how FHA loan rules for inducement to purchase can affect your FHA loan transaction? We often discuss the basics about FHA home loan requirements, and especially in the area of seller rights and responsibilities, but there are other issues associated with inducements to purchase you should know about aside from the obvious issues. What kind of requirements? Many know that sellers may contribute up to six percent of the sale price of the home toward the borrower’s closing costs. But the FHA’s six percent rule (no interested party contributions above six percent of the sale price of the home without a corresponding reduction in the home loan amount) is just one factor. There are other inducements to purchase that can also result in a reduction of the loan principal amount to match the exact dollar amount of the inducement. According to HUD Handbook 4000.1, Section II.A.4.b(ii)(O), the following are considered inducements to purchase, we find the following instructions to the lender: “Inducements to Purchase refer to certain expenses paid by the seller and/or another Interested Party on behalf of the Borrower and result in a dollar-for-dollar reduction to the purchase price when computing the Adjusted Value of […]
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