For a Fannie Mae principal-residence purchase, the sales price and appraised value are both $420,000, LTV/CLTV is 95%, and the ordinary 3% financing-concession limit applies. The seller offers $16,000 toward buyer closing costs. Before the actual-cost limitation, what is the percentage-based ceiling?
Correct Answer
A) The 3% limit applies at 5% down, so $12,600 is the most that counts
A. The percentage-based ceiling is $12,600. $420,000 × 0.03 = $12,600, using the lower of price and appraised value, not loan amount. The offered $16,000 exceeds this ceiling by $3,400. Scope and exceptions: Usable financing concessions also cannot exceed actual eligible closing costs. Excess concessions require appropriate sales-price and LTV/CLTV treatment; they are not automatically cash back or available for the down payment. Program exceptions are excluded by the stem. Source: Maximum Financing Concessions; Sales Concessions — https://selling-guide.fanniemae.com/sel/b3-4.1-02/interested-party-contributions-ipcs
Why This Is the Correct Answer
A. The percentage-based ceiling is $12,600. $420,000 × 0.03 = $12,600, using the lower of price and appraised value, not loan amount. The offered $16,000 exceeds this ceiling by $3,400. Scope and exceptions: Usable financing concessions also cannot exceed actual eligible closing costs. Excess concessions require appropriate sales-price and LTV/CLTV treatment; they are not automatically cash back or available for the down payment. Program exceptions are excluded by the stem.
Why the Other Options Are Wrong
Option B: The 9% limit applies, because the property is a primary residence
Principal-residence status alone does not confer the 9% tier.
Option C: The 6% limit applies, so the whole $16,000 credit may be applied
The 6% tier does not apply to this 95% ratio.
Option D: No limit applies, since seller credits are a matter for the contract
A contract cannot override program limits.
Exam Tip
Check the percentage base, ratio tier and actual costs separately.
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