Sunday, March 17, 2013

Should I ask the seller to pay my closing costs?

That depends.
In certain market segments, sellers are commonly asked to contribute to buyer closing costs. Generally, the guideline is that a seller can pay up to 3% of a buyer's closing costs (depending on the type of loan).

Keep in mind, that the seller still has a "net" price they choose to achieve and paying your closing costs directly reduces their bottom line therefore they may counter at a higher purchase price. Therefore, asking for closing costs may increase the actual price you pay for the home.
For example, if the home is offered at $200,000 and you offer 200,000 but also ask the seller to 3% in closing costs for you ($6,000), the seller would see a net of $194,000. If they are ultimately trying to receive $195,000 for the home, you may receive a counter offer of $201,000 and the agreement to pay those costs for you.

If they increase the purchase price to cover their closing cost contribution to the buyer this amount is (in theory) rolled in to the mortgage and paid out (with interest), over the period of the buyer's mortgage. If you have cash on hand, this probably doesn't make sense to you, but for buyer's who don't, it is a great way to leverage into home ownership and keep some money in savings for unexpected expenses in the first year of ownership.

Closing costs can include:
Attorney fees (if applicable)
Recording Deed
Inspections (Home, Radon, Termite, Mold, Chinese Drywall)
Insurance Policy
Flood Insurance
Well Test/Sulfur/Sodium
Proration of Real Estate Property Taxes
Proration of Maintenance Fees
Mortgage Title Insurance Policy
Service Fee or Origination Fee (if applicable)
Doc Stamps on Deed
Lender's Attorney Fees
Appraisal Fee
Assumption fee on existing mortgage
Intangible Tax
Recording Mortgage
Credit Report
Escrow Account (Taxes and Insurance)

Need help from a mortgage professional? Check out this guy to the right.  [Curt Smith, Bell Mortgage]

Or you can just call me... I know a lot of great mortgage professionals and I can connect you!


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