Homes aren't cheap! The purchase of a home involves a transaction in the tens or hundreds of thousands of dollars. We talk about abstract theories such as payments, interest rates, and points. It's easy to lose focus on the big picture. All this negotiating and maneuvering takes place to put into a service a mortgage that you will spend hundreds of thousands of dollars on over the years.
Closing costs aren't cheap either. You can expect to use the services of a broker, title company, appraiser, inspector, etc. to help close your loan. When you see all the work being put into the loan, and the magnitude of the financing, you can start to see that your monetary obligation in all of this is justified. You may need a lot of money out of pocket to close on a home.
For many people, their main concern is a lack of funds to close. This is understandable because I know that closing costs are a large obligation among many others that you have on an ongoing basis. I also know that our salaries have not increased along with the price of real estate. So, people will ask me the most important question to them: Can the seller pay my closing costs?
Yes they can. We are in a buyer's market. There is a much higher supply of homes on the market than there are qualified prospects to buy them. This puts pressure on sellers to compete against each other and bring the price of their home down. You can use this motivation to get the seller to cover your costs, but there are limits.
Instead of negotiating for a lower price, you can ask them to include a seller's assist. The assist that the seller is giving you is simply allowing you to buy the home for less than its full appraised value. The seller agrees to walk away with less money than he had planned. The extra money is credited towards your closing costs resulting in less strain on your wallet at closing time.
Even in the seller's assist, you can lose sight of the big picture. Your loan amount doesn't change. Only the seller's net proceeds changes. Therefore, you are really financing a portion of the closing costs. You should always research to see if you are better off paying the closing costs up-front rather than financing them for 30 years. However, if the seller's assist is the only way to get you into the house, it's something worth considering.
My disclaimer here would go something like this: Use your common sense! The sellers assist can help you get into the home. But, then what? What if the furnace breaks? What if your car needs new brakes? What if you get demoted or laid off? If you spent your very last dollar on your closing costs, you've just become the next victim of home foreclosure. You need to maintain a reserve account at all times. Talk it over with your Mortgage Professional for more information and more thorough analysis based on your particular situation.
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