Real Estate
October 18, 2019
link to facebook link to twitter
More Stories
Seven common mortgage mistakes What to expect in today’s loan process? How to use rental income to qualify for a mortgage How to plan the optimal time to buy a rental property The loan process and what not to do Why waiting for mortgage rates to get better is a losing proposition A factor that can drive your mortgage cost up How child support and alimony can affect your ability to get a mortgage What to look for when getting a mortgage on a manufactured home Why getting a 30-year fixed-rate mortgage is a smart financial move What you need to know about securing a VA mortgage How mortgage lender credits work Five quirky refinance scenarios that work Two mortgage loan programs get a better interest rate The #1 mistake consumers make when getting a mortgage… Things that affect your first-time buyer mortgage options Be wary about paying off this type of mortgage Best benefit for your first-time home buyer Why the VA mortgage is the best home loan A bank statement program might help get a mortgage Read the fine print Cash-out refinance or home equity Should you refinance with today’s mortgage rates? Should you buy and build or buy a single family home? Don’t make mistakes when getting a mortgage refinance Home value when refinancing Should you go FHA or conventional for purchasing your first home? Mortgage rate sounds too good to be true Finances matter when buying a home FHA requirement might hurt buying chances How to get a mortgage without providing tax returns The new way to get a mortgage with 1 year income tax returns Four common home buying mistakes to avoid How to create wealth with your income and finances Should you buy a house with monthly mortgage insurance? 2019 conforming loan limits rise FHA loan limits for 2019 increase Working two jobs makes now easier to get a mortgage How much of your mortgage income should be going towards an auto loan? How much are closing costs when you purchase a house? Self-employed income Common questions on financed mortgaged insurance loans A loan program you may be eligible for based on your credit score Can you use roommate income to get a mortgage? Pulling credit may not make sense Cash to payment formula when buying a home Lender knows how to purchase business? Be careful getting a mortgage if you have a bankruptcy How expensive your mortgage will be due to bad credit? A non-traditional program for self-employed mortgage borrowers What you need to know about the mortgage 4506-t document Two mortgage process problems you will want to avoid How the mortgage process gets ugly if you have a difficult picture Could the 30-year fixed mortgage get to 3 percent? Purchase price should not be most important factor Three reasons you should not buy a home Three quirky issues that will hurt your mortgage Why your mortgage payment keeps changing The credit score it takes to get a mortgage How 1031 tax-deferred exchanges work Six to avoid when purchasing a home Mortgage inquiry makes your credit score drop? Transfer property to family and be protected under Prop 13

How to lower your cash to close when buying a home

By: Scott Sheldon
December 7, 2018

Purchasing a home can require a down payment plus closing costs which can equate to thousands of dollars. Here’s a way you can get your foot in the door using other people’s money.

The national housing market has slowed, and refinance applications are down to the lowest level in years while purchase applications are otherwise still stable. This is being brought on by a rise in rates. You can purchase a house with as little as 3.5 percent down on an FHA loan or even 3 percent down on a conventional mortgage. Three percent doesn’t sound like much; however, in the relationship to the price point you’re desiring, it could be.

For example, 3 percent on a house for sale at $600,000 is $18,000 of cash while 3 percent on a $300,000 home is $9,000. This represents a significant difference for $300,000 more in purchase price. One of the things that has always been available in the marketplace, but is becoming more common is the use of seller credits for closing costs.

Let’s say you identify a house in the marketplace for $600,000 and you just have enough for the down payment totaling $18,000. Closing costs on a $600,000 house on an average are going to be approximately $12,000. So, when you make an offer for $600,000 you’re not really making an offer for $600,000, in the eyes of the seller you’re really making an offer for $588,000. So, you would make an offer for $600,000 with a $12,000 seller credit for closing costs. Or if you were looking to purchase that same house and you wanted the seller to net their $600,000 asking price you would make an offer for $612,000 with a seller credit for $12,000 giving them their desired price point.

Whenever you make an offer on a house and it involves a seller credit for closing costs know that it does make your offer a little bit weaker because the seller must give up monies from their pot.

A seller credit can work when:

• in the right price point

• property has been on the market for a while

• lost that initial momentum when it hit the market

This is something you’ll want to make sure to have the advice of your real estate agent and your lender as a seller credit for closing cost is a fantastic way for you to reduce your total cash to close.

The way that you would want to structure this for the maximum benefit is that you want a dollar amount for the closing costs. Using the example above: the $12,000 is for all closing costs both reoccurring and non-recurring. In the establishment of your offer with your real estate agent you want there to be a dollar amount for all closing costs, you don’t want it broken down reoccurring versus non-reoccurring.

Here’s why… if you have closing costs credit only for non-reoccurring then that means the other closing costs are on you to pay.

Closing costs that are reoccurring includes interest, taxes and insurance as they reoccur each month as a byproduct of carrying real estate. Non-recurring closing costs are the one-time fees appraisal fee, lender fee, discount points if you’re paying any, title insurance, settlement fees etc. Those fees can add up and are considered the “junk fees”. Remember total closing costs when you’re asking for a seller credit. Now if it comes down to an impasse remember everything in real estate is negotiable so maybe you get a credit for half the closing costs with the seller for example, but the key here is to make sure that goes towards closing costs so as not to delineate it on what type of closing costs the seller is paying. This way you get the maximum advantage with as little cash to close as possible.

Looking to buy a home? Get a no cost quote now.

Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at www.sonomacountymortgages.com.