You
have finally saved enough for a down payment on your first home. You’ll
have just enough money left to buy a little furniture and sheets for
the bed. Then you hear about the additional costs that you hadn’t
anticipated. The costs have you concerned about how you will proceed.
One
way to cover a shortage is by including a request that the seller pay
closing costs as part of the purchase contract. As a rule, sellers may
pay a maximum of 3%-6% depending on the loan program you will be using.
In today’s market, sellers are willing to negotiate numerous
concessions in order to get the property sold.
Things such as
loan fees, points, escrow and title fees, appraisal costs and even
pre-paid insurance costs are negotiable items. Sellers are often even
willing to buy-down the interest rate in order to help you qualify for
a home that may otherwise be out of reach. Paying a consumer debt or
including furniture as part of the cost of the property are generally
not allowed. And while reasonable repair requests are probably fine,
large repair credits won’t be allowed and may make the lender nervous
about the collateral.
If they feel the property will require
extensive repairs, it’s understandable that they may not be willing to
make the loan. Keep in mind that when a credit is included in the price
of the home, the appraisal must support the entire purchase price. The
entire price must be justified based on the sales of similar homes in
the neighborhood. When the credit amount exceeds costs, any excess can
be credited to the buyer as a reduction in the purchase price or a
return of the deposit money. The contract should specify how this will
be handled.
Your Realtor® should know how to structure the
offer in order to consider the nuances of the credit. They should also
have a pretty good idea right up front if the appraisal will support
the added costs. So don’t be shy, ask the seller. Who knows, it may
mean the difference in sitting on the floor or sitting pretty with the
new furniture you’ll be able to buy!
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