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  • Writer's pictureDistinctive Mortgages

1 out of 6 home buyers get down payment assistance from the seller. Here’s what that tells us.

How do Americans come up with the funds they need for a down payment?

Many of the sources are familiar: savings or family help for first-time buyers, or the proceeds of a sale for those moving up to a second or third home. But one may be more surprising. According to a survey published Tuesday by Freddie Mac, 16% of buyers said they’d had help from their home’s seller.

In some ways, the concept of a seller subsidy seems strange in the housing market, where deals are both personal and individual. Homeowners aren’t car dealerships or big box retailers who develop financing gimmicks for their customers. And any funding strategy that buyers use must conform to strict guidelines from lenders and underwriters, all of whom want to make sure buyers can service a mortgage on their own.

Still, while it may seem incongruous, such subsidies are a reality of the housing market, particularly in areas where demand is much hotter than supply.

“They’re popular and they’re needed,” said Brooke Anderson Tompkins, president of upstate New York-based 1st Priority Mortgage. Tompkins started her career as a lender years before the housing crisis, and she’s seen this strategy used in all kinds of cycles.

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