Home Buying Advice - Closing Costs and other Financing Incentives
Why you may or in some cases may not want to include closing costs in your offer.
Getting the Seller to Pay Your Closing Costs
Buying a home is not a cheap process, there are many expenses that have to be met, but there are some ways a buyer can alleviate the closing costs.
One way is for the buyer to request that the seller pay some or all of their closing costs and prepaid items, which may include points to reduce the buyer’s interest rate. Some types of loans require that the buyer pay a percentage or all of the closing costs, but in most cases, lenders allow the seller to pay them (usually up to 3%). After all the lender just wants to be paid.
This is fine in a slow market when the seller needs to get rid of their home, but in a strong housing market this can be a disadvantage. If the seller receives multiple offers they are less likely to go with the one that is asking for a large amount of seller concessions.
There are certain things that you can do in order to get the seller to take on these expenses. For a start make your offer close to the asking price. If you make a low ball offer and then also ask for closing costs the seller is probably not going to look kindly on the offer. It is also worth noting that you probably cannot offer the asking price and then ask for 3 percent worth of concessions, remember the property will still have to appraise in order for you to get the mortgage.
You may also have to be more flexible to the seller’s demands. For example, the seller may already have purchased their new home and want to move quickly. If you meet their demands they are more likely to accept payment the closing costs.
In some cases the seller may counter, meeting you part way. Remember sometimes the seller may not have the means to pay all of the closing costs. You may have to work with the seller to see want they can pay for and want you will have to pay for.
If the seller can’t or will not pay for the closing costs, you may be able to roll these costs into the mortgage loan. This depends upon the type of loan you are getting and will of course increase your loan balance and repayment amount.Return to Home Buying Advice