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Fannie Mae – Builder Allowances In the Contract
Question:
Can the builder give the buyer an allowance in the contract for anything other than closing costs? As an example, blinds, flooring, etc.?
Answer:
Not really…. meaning this: A builder can provide an allowance, but that then must be treated as a sales concession, which requires a dollar-for-dollar reduction when calculating the LTV. This is true even if the financing concessions are not exceeded.
Sales concessions include:
- Furniture
- Decorator allowances
- Moving costs
- Other giveaways
These types of concessions must be deducted from the property’s sales price, and the lower of the reduced sales price or appraised value must be used to calculate LTV/CLTV ratios for underwriting and eligibility purposes.
Reference:
Fannie Mae Section – B3-4.1-02 – Interested Parties