So you are buying your first home – or maybe it’s your second – remember those closing costs? We talk about the down payment but not everyone thinks about the closing costs – they can’t be that much, can they? When you add up the closing costs and pre-paids (first year of insurance and setting up your escrow for taxes and insurance), it adds up in a hurry! It can be close to 3% of the sales price – seems like a lot until you think about a year of homeowners insurance, taxes, appraisal, title fees, underwriting fees, etc. It doesn’t take long to add up. So how do you pay for that when you just saved enough for your down payment?
There are some options if you do not have enough of your own money. There are first time homebuyer programs that give you down payment assistance – that can also be used for closing costs. Some areas have grants that can help with closing costs. There are areas that have special programs for first time homebuyers. Some of these need to be paid back, some have income limits and purchase price limits.
Are there other options? Yes – one that is frequently used is to ask the seller to pay your closing costs. Typically you can ask for up to 3% in seller paid closing costs. This can affect the sales price of the home you want. You may need to add that amount on top of the list price to get the seller to pay them – sometimes you need to go even higher! You need to make sure the home will appraise for the amount you are offering though. If you go too high, the appraisal may not come in and then the seller will ask you to pay the difference. Talk to your realtor about the value and homes that have sold in the area so you are covered just in case!!
Another option is to see if you can get a gift from parents or grandparents to help you with your closing costs. The gift needs to come from a family member.
One more option is to ask the lender if they can help. How does that work? You may have to select a higher interest rate, but then they can give you a lender credit to help offset your costs. It depends where rates are, but sometimes it may as simple as going up an .125 or .25 point to help offset some of the costs. With rates as low as they are, that may be an option.
If you need help with your closing costs, talk to your loan officer and see if they have any special ideas that might help you. Maybe there are some special programs in your area that can help you buy a home sooner than you expected!!
Leslie Vanderwerf, NMLS ID#335509, Everett Financial Inc, dba Supreme Lending, An Equal Housing Lender, NMLS#2129 – Email – Website
