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IF SELLER PAYS CLOSING COST IS IT ADDED TO BUYER LOAN AMOUNT

by TAWILLIAMS0510418 from , . Jul 8th 2013 Reply


William J Acres (William_Acres)
#73 ranked lender in Arizona - 8,728 contributions

What happens is the seller does not actually pay your costs.. they give you a credit, which YOU can use to pay your costs. I know its a technicality, but it's important to understand that it's a sellers credit, and they don't actually pay your costs.. When you look at the final HUD-1 statement, you will see the sellers side and the buyers side.. on your side, it will list all of your costs associated with the purchase and it will also show any credits being applied.. this is where the sellers credit will show. If the seller is giving you enough credit to pay all your costs, then no.. you will not finance any of them.. however if the seller credit is not sufficient to pay all your costs, then you would have to pay them by either bringing in more cash to close, or if it can fit within your allowable Loan to Value, it can be added to your loan.. .. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

Jul 8th 2013
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William J Acres (William_Acres)
#73 ranked lender in Arizona - 8,728 contributions

What happens is the seller does not actually pay your costs.. they give you a credit, which YOU can use to pay your costs. I know its a technicality, but it's important to understand that it's a sellers credit, and they don't actually pay your costs.. When you look at the final HUD-1 statement, you will see the sellers side and the buyers side.. on your side, it will list all of your costs associated with the purchase and it will also show any credits being applied.. this is where the sellers credit will show. If the seller is giving you enough credit to pay all your costs, then no.. you will not finance any of them.. however if the seller credit is not sufficient to pay all your costs, then you would have to pay them by either bringing in more cash to close, or if it can fit within your allowable Loan to Value, it can be added to your loan.. .. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

Jul 8th 2013
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Steven Brand (stevenbrand)
#4 ranked lender in Minnesota - 121 contributions

The most simple of answers (if you really break it down) is... yes. Here is a BLOG directed to Realtors to help explain this oddity: http://iloanhomemortgage.com/uncategorized/seller-contributions-towards-closing-costs-on-a-home-purchaseAND... here is a BLOG from one of my partners directed more towards buyers and sellers to help them understand the same phenomenon: http://iloanhomemortgage.com/uncategorized/how-often-do-sellers-pay-closing-costs-neverSteven Brand...MN/WI Licensed Mortgage Guy for over 12 yrs.. iLoan Home Mortgage 612-386-5306 Steve@YourFavoriteMortgageGuy.com

Jul 8th 2013
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Michelle Curtis Loan Originator NMLS 401173 (EmbassyFundingLLC)
#77 ranked lender in Florida - 2,244 contributions

Typically yes, the seller just allows the buyer to add a fixed dollar amount to the purchase price in order for the buyer to finance the closing costs. It doesn't affect what the buyers net will be. The only thing is, you are adding those costs to the purchase price so the home must appraise for the purchase price that has the closing costs added to it. It is commonly called a sellers concession, or sellers assist. An example is as follows. If a buyer and seller agree to a 100K purchase price and the buyer wants to roll in the closing costs, and say it is an FHA loan which allows up to a 6% sellers concession, the seller would have to allow the buyer to roll them in making the new purchase price 106K. Your down payment and loan amount will be based on the 106K. Hope this helps.Call us or email us at 201-962-3555 or Team@BestMortgageOption.com for ano cost no obligation analysis of your situation ask for Michelle or Benny. We will find the Best Mortgage Option to suit your needs! Check us out at www.BestMortgageOption.comAsk us about the awesome discounts we offer heroes as a Homes for Heroes affiliate!

Jul 9th 2013
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Kiernan Brown (KiernanBrown)
#50 ranked lender in Michigan - 149 contributions

Here is a good short answer. The seller is allowing a portion of the purchase price to be used towards the buyers closing, costs pre-paids, and escrows. Since these concessions are a protion of the purchase price, it is creating a higher loan amount for the borrower. Understanding this, make sure you negotiate for the purchase price and amount of seller concessions/credit that makes send for you.

Jul 9th 2013
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Dave Metsker (DaveMetsker)
#36 ranked lender in Oregon - 2,318 contributions

You end up paying the closing costs (plus interest) over the term of the loan.

Jul 9th 2013
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Carlo Sanchez (MortgageLendingPro)
#0 ranked lender in Utah - 1,163 contributions

You have an agreed upon price and then the seller will pay whatever is agreed towards closing costs. at closing this amount is deducted from what the seller receives back at closing.

Jul 9th 2013
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Elden Lewis (elewis_409_299)
#41 ranked lender in Indiana - 223 contributions

In a sense yes you are doing that but in a backward sort of way. Lets take an example: Lets say a seller list there house for 200,000 and you make an offer for 195,000 and the seller to pay $3,000 of your closing cost, then that means the seller nets after paying your closing cost $192,000 and that means that if the seller would have accepted an offer of $192,000 and not paying any closing cost. Thus by you making an offer at $195,000 you in effect rolled the closing cost into the purchase price thereby financing the closing cost.

Jul 9th 2013
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Ricardo Cobos (RicardoCobos)
#54 ranked lender in North Carolina - 10 contributions

Great question! Technically, the only closing cost which are allowed to be added to the base loan amount on a purchase money loan is a funding fee such as in the case of a VA or USDA loan Upfront PMI fee as in the case of a FHA loan. However, when you get right down to it, if the seller has agreed to a sales price which includes a credit towards the buyers closing costs, then all but the required down payment are actually being added to the loan amount. For example, if the seller has agreed to a price of $97,000 and the house is worth $101,000 as determined by the appraisal and the sales contract is amended to include a rebate for the buyers closing costs for say, $3,000, then technically the closings costs ARE being added to the loan amount. However, the contract must stipulate that the credit is being used towards the buyers closing costs, points and pre-paid items; otherwise a lender may not allow the buyer to take the entire credit. Additionally, be careful that the credit doesn't exceed the afore mentioned and causes a credit balance because the buyer will still be required to meet the lenders minimum down payment interpretations. In the case of a n FHA loan, the buyer is still required to have a minimum of 3.5% down-payment and not $1 of that can come from the seller in the form of an incentive. In the case of a zero-down loan such as a USDA or VA loan, the seller credit cannot cause a credit balance to the buyer, unless the buyer can prove the credit was caused by closing costs Paid Outside of closing such as for an appraisal inspection or home inspections. Bottom-line - consult with your mortgage lender before modifying your contract because they will know exactly how their underwriters want to see that sort of thing worded in their contract. Thanks again for the great question! Ricardo Cobos - Bilingual Mortgage Lender, Cary NC NMLS 120651 (919) 526-0183

Jul 8th 2013
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