Yes, this is what our agent was telling us. Sounded odd to me as well.
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I'm sure laws vary from state to state, but almost every new development in FL and OK advertise that the seller(the builder) pays all closing costs.
Ask to see any strange sounding law in written form.
I looked a bit and it looks like that is an FHA guideline implemented after the subprime issues. Looks like if you put less than 10% down the seller can pay up to 3% of the value of the home in closing costs. If you put down more than 10% they can cover up to 6%.
Is that on FHA loans only? We were going with the conventional mortgage.
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These may help to clear it up:
http://my.chicagotribune.com/#sectio.../p2p-71591773/
http://www.valeriespringer.com/2012/...ller-paid.html
Good stuff in those articles. Lender guidelines are not "law" but often get quoted as such.
When someone gives you the "by law" or "under the law" BS, ask them for the citation to the statute or case and go look it up. PM me if you ever need any help.