What is the maximum contribution a seller can make towards a buyer's closing costs on an FHA loan?

The maximum contribution that a seller can make towards a buyer's closing costs on an FHA loan is indeed 6% of the purchase price of the property. This provision is part of the FHA guidelines that allow sellers to assist buyers with their closing costs, which can make it more affordable for buyers to close on a home by reducing the amount they need to bring to the table at closing.

This flexibility is beneficial in a financing context, especially for first-time buyers or those with limited savings, as it allows buyers to have reduced financial burdens upfront. Sellers may use this ability to incentivize buyers and make their property more attractive in a competitive market. It's important to note that while other loan types, such as conventional loans, may have different limits on seller contributions, the FHA's 6% cap is specifically outlined in their regulations, which is why this option stands out as the correct answer.