How do you structure a purchase loan to include seller paying for new carpet and closing costs?


The REPC calls for the seller to include “up to $5000 for flooring and lighting. This will be paid through a Escrow Holdback. Work must be completed 30 days after settlement” They are also including seller paid closing costs.

Is there a way to structure this to work with a bank? I am being told Conventional guidelines will not allow it.

What is the best way to structure this loan?

$215,000 p.p., O.O, SFR conforming Purchase in UT, buyer is putting 5% down with 720 ficos.

Thank you in advance,



Chris: if the sellers intent is to reduce his proceeds by $5,000, in order to get FNMA/MI approval you must remove the sales concession from the REPC and handle it outside of closing. did the appraiser flag the 1004 subject-to? Note the concessions in report? if so, a revised 1004 will be required. the seller can’t “pay” the buyer non-financing concessions. handle outside of closing with the same escrow account but funded by seller directly post closing. this requirement has been standard for years. Only on RD loans have I been able to fund escrow from seller proceeds on the HUD-1.

Answered about 3 years ago
about 3 years ago Chris Hunlow said:

Thank you, John. The appraisal has not been completed yet but the carpet is livable as-is so I do not believe it will be flagged. I wanted to double check because the Realtor insisted it could be done. I heard it may be able to do with FHA? Either way the consensuses sounds to be to let the seller pay for it on his own after closing. – Is there a specific way the buyer can insure the seller pays for it? Would this just be as simple as the seller including it into irrevocable settlement disbursement instructions?


Hi Chris. Legally, lenders and appraisers must be made aware of all the terms of a sales contract. In MOST situations, the seller will often agree to pay some/all of the borrower’s closing costs and prepaid expenses, which leaves that much more in the buyer’s pocket and theoretically helps cover the carpet, etc. This is a common, and completely legal practice. Asking title companies to handle “side” agreements without including them on the settlement statement is not legal and is legally considered mortgage fraud. Not trying to be a downer here, just hoping to help you avoid turning a relatively small issue into a big one. Has the appraisal been ordered, or sales contract given to your lender? If not, the simplest, legalest, way to handle it is to write a new contract, with same sales price, stating that seller is to pay $5000 towards your closing costs and prepaid expenses. As long as the appraiser doesn’t flag the carpeting as unlivable (which would be quite unusual), that’s a legal and effective way to handle your situation. Hope that helps. Ted

Answered about 3 years ago
Ted Rood
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