Your Buyer's Guide to Closing Cost Credits

Reblogger Gabe Sanders
Real Estate Agent with Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales 3090099

Closing costs are often misunderstood and both over and under estimated.  So, here's some good information about closing costs from Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi :

 

Your Buyer's Guide to Closing Cost Credits



Closing Costs ... people are always interested in them.

 

HOW they can be paid, borrowed, financed ... and possible credits for Closing Costs that might be available to them from their Sellers or their Lender. 

I find that many of my new clients have preconceived notions about Closing Costs.  Or they're just plain confused by them.

And it's easy to understand why this can be the case.  The differing loan types ... Conventional, FHA, VA, USDA, Jumbo loans ... all have varied Rules and Guidelines.  It can be tough for new Borrowers to wrap their head around all of it. It's a lot to digest. 

Adding to the confusion:  In some cases, the amount of down payment made on the purchase can affect the amount of allowed credits received from a Seller.  

Yep.  See what I mean?  It can seem a bit overwhelming. 

That's why, when I hold my initial conversations with Borrowers regarding Closing Cost options, I begin at the beginning ... with the basics.  That means an explanation of what Closing Costs are.  

My explanation always includes a list of those cost items that are "Pre-Paid" ... meaning they are funds needed to Close on a Conventional Loan in addition to the Down Payment made.

In previous articles, I've discussed the various programs available for Home Buyers with Conventional Financing, but suffice it to say ... 3%, 5%, 10%, 15%, and 20% Down (or more) programs are prevalent today.  

For those making Investment Property purchases: 

The rules regarding the Seller's contribution towards Closing Costs is straightforward and clear cut.  The Seller can contribute no more than 2% of the Sales Price, if negotiated into the Contract. 


Here's an example:

 

Purchase Price = $200,000 
 X  2% 
=
Seller-Paid Contribution of $4,000
 
It must be noted:  It's possible that the Lender can credit back some or all of the Closing Costs, either in the form of a lump sum or a percentage (%) of the Loan Amount.  I've found that typically my Borrowers will absorb or accept a higher interest rate as a trade-off for receiving that Closing Cost credit.
 
In NO case, can Closing Costs owed by a Borrower, be "rolled into" the loan amount on a Conventional Loan.  Certain program costs can be allowed when utilizing FHA, VA, and USDA financing, however.
 
For Owner-Occupied purchase transactions, the allowed Seller-paid Closing Costs vary according to the Down Payment percentage (%).  (Conversely, the Loan-to-Value (LTV) Percentage).
 
Those variations are shown in the table below: 
 
 
These stated credits can be used to offset (pay for all or part of) the true Closing Costs related to:
 
  • Title Fees
  • Lender
  • Appraisal Fee
  • Attorney Fee
  • Credit Report
  • Flood Certification Fee
  • Points
  • Etc. 

 

... as well as pre-paid items, which generally are set aside for:

 
  • Real Estate Taxes
  • Homeowners Insurance 
  • Interest Charges
  • Home Owners Association Dues (if applicable)
  • Mortgage Insurance Premiums (initial or renewable
 
As you can tell from the info provided above, there are many scenarios available for Buyers' consideration prior to their making a request for Seller-paid Closing Cost assistance.  
 
Each Buyer has their own individual and unique finances, needs, and circumstances that contribute to the final outcome.  I will (or you own Lender will) conduct a thorough analysis of all options available to you ... and then discuss them with you.  Once that is completed, you'll be able to make a sound decision regarding your Closing Cost request.
 
Buyers need to know:  It's almost impossible for Buyers to go back and ask for Seller-paid Closing Costs assistance AFTER a Contract has been signed.  Having your discussion with me (your Lender) and your Realtor ... proactively, early, prior to entering into Contract is vitally important and wise.

Need more info?  Have questions regarding your Chicagoland home buying and financing?  Let's talk today!
 

 

    
    * Hoping to Buy or Refinance a Home in New Lenox, Will County, or elsewhere in the Chicagoland area? Contact me! I'll put my 40+ years of Mortgage experience and expertise hard to work on your behalf.
     I'm easily found at:

Gene Mundt
Mortgage Originator - nmls #216987 - IL Lic. 031.0006220 - WI Licensed
 
American Portfolio Mortgage Corp.
nmls #175656
 
Direct: 815.524.2280
Cell or Text: 708.921.6331
eFax: 815.524.2281
 

  

 Twitter Account of Gene Mundt, Mortgage Lender   LinkedIn Account of Gene Mundt, Mortgage Lender   Facebook Acct. of Gene Mundt, Mortgage Lender   Pinterest Acct. of Gene Mundt, Mortgage Lender   

  Zillow Acct. of Gene Mundt, Mortgage Lender     Gene's Chicagoland Blog/Gene Mundt, Mortgage Lender  

    

 

Gene Mundt

 Mortgage Originator  -  NMLS #216987    

                                   IL Lic. #0006220  -  WI License                                                                                                     

NMLS #175656

 

Gene Mundt, Mortgage Originator,  40+ years of #mortgage experience, will offer you exemplary mortgage service and advice when seeking:  #Conventional, #FHA, #VA, #Jumbo, #USDA, and Portfolio Loans in #Chicago and the greater Chicagoland region, including:  The #Lincoln-Way Area, #Will County, (#New Lenox, #Frankfort, #Mokena, #Manhattan, #Joliet, #Shorewood, #Crest Hill, #Plainfield, #Bolingbrook, #Romeoville, #Naperville, #Wilmington, #Peotone, etc.), #DuPage County, the City of Chicago, #Cook County, and elsewhere within IL and Wisconsin. 

 

Your Referrals & Testimonials are Always Greatly Appreciated! 

 

Email Me .. to be added to my Mortgage & Real Estate Newsletter

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Rainmaker
611,209
Lauren Selinsky Broker CRS
California Coastal Estates - Aliso Viejo, CA
"Your California Real Estate Broker" TM #oclauren

Excellent reblog and yes I think it is misunderstood for many reasons. Most people don't know what the costs are or costs they did not think of. I guess I have been doing too long as they are no brainers to me now. :D

Feb 14, 2017 12:20 AM #1
Rainmaker
2,490,279
Sally K. & David L. Hanson
Keller Williams 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce - Short Sale

Over estimated...you bet and we never ever use them....to us, it takes away all the negotiation power...and very often annoys the Seller.

Feb 14, 2017 02:58 AM #2
Rainmaker
1,391,348
Gary L. Waters, Broker Owner, Waters Realty of Brevard, LLC
Waters Realty of Brevard, LLC - Rockledge, FL
... a small office, delivering big service!

Good re-blog topic.  Knowing the amount of money required to close and potential loan terms helps the buyer and their Realtor make an offer that is more likely to close.

Feb 14, 2017 03:56 AM #3
Rainmaker
3,600,630
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Thank you for reblogging the post. I missed reading the original one.

Feb 14, 2017 05:34 AM #4
Rainmaker
977,634
Will Nesbitt
Nesbitt Realty at Condo Alexandria - Alexandria, VA
Nesbitt Realty is a family-run brokerage.

Talk to Real Estate Agent with Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales  Gabe Sanders  Gabe@GabeSanders.com through Stuart, FL.

Feb 14, 2017 08:37 AM #5
Rainmaker
1,084,968
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Appreciate you sharing this info with your readers, Gabe Sanders ... you're absolutely right when you say that costs ... for both Buyer and Seller ... are too often misunderstood or represented.  This is a vitally important conversation to have ...

Gene

Feb 14, 2017 01:41 PM #6
Rainmaker
3,128,126
Lou Ludwig
Ludwig & Associates - Boca Raton, FL
Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC

Gabe 

Great choice to re-post Gene Mundt on closing cost credits.

Good luck and success.

Lou Ludwig

Feb 14, 2017 08:38 PM #7
Rainmaker
4,112,380
Roy Kelley
Realty Group Referrals - Gaithersburg, MD
Roy and Dolores Kelley Photographs

This is an excellent selection for a reblog and important information to share.

Feb 15, 2017 06:57 AM #8
Rainmaker
542,311
Nick & Trudy Vandekar, 610-203-4543
Long & Foster Real Estate Inc 610-225-7400 - Devon, PA
Tredyffrin Easttown Realtors, Philly Main Line

Good choice for a re-blog, always surprised by potential clients when they think zero down means they need no money at all to buy a house. This really explained what those closing costs are and what you are going to need.

Feb 16, 2017 07:52 AM #9
Rainmaker
3,781,094
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Thank you for stopping by and taking the time to read my re-blog.

Mar 17, 2017 05:14 AM #10
Rainmaker
3,781,094
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Thanks for your comments; it’s always good to hear from you.

Mar 17, 2017 05:15 AM #11
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Rainmaker
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Gabe Sanders

Stuart Florida Real Estate
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