Extra money left at closing, lender refuses to give it to us!!!?

Question

I am the buyer and due to the seller putting money towards closing costs, we have money left over after paying for the closing costs. Our lender says that he is not allowed to give this extra money back to the buyer and can only use it to reduce the loan amount.
Is this right or are there other ways in which we can get this extra money in hand?

Answer 1

Many lenders do not allow cash back to the buyer at closing.

Look at your loan commitment and see. If those are the terms you agreed to, then you don't have any recourse.

Answer 2

Be happy that it's going to get used to lower your loan amount. When you write an offer, make sure that the amount of "help" in closing cost and pre paid expenses asked for can actually be used. Make sure that amount is allowed by the type of loan you're getting.

In Texas, the paragraph relating to this states that the seller will pay "up to $______ towards the buyers closing costs and prepaid expenses..." If you put in more money in that blank than what is allowable, you'll leave money on the table. (at least if I'm the seller's representative) If I'm your representative, we won't make that mistake.

BTW - This sometimes happens because the buyer ends up with a different loan program than what the buyer and loan officer thought they were going to use at the time of writing the offer. .... another reason why it's really a good idea to be fully approved for your loan and know what loan you will be using BEFORE finding your house.

Answer 3

That would depend on how the contract was written. Did your contract say the seller will pay up to xxx amount in closing costs for you?

Did you use an attorney or a real estate agent in this transaction? Did you close with a title company?

Many people don't understand how the purchase and sale of real estate really works, but the Lender can't give anyone money, with the exception of the loan amount promised, in return for the agreement to pay it back.

Whomever closed this transaction is in charge of the other funds, and they have to abide by state laws, as well as what was written in the contract.

Seek the counsel of a real estate attorney if you did not have a REALTOR® representing you in this transaction. The time for you to have found the answer to this question was at the closing, your leverage is now gone if the transaction has closed.

Answer 4

That depends upon state law. In TX, you are not allowed to take cash from closing as a buyer under any circumstances.

If the seller's added funds at closing were not disclosed prior to the close the lender may well be right in their claim. And if your loan program required you to pay certain items at closing (FHA & VA have certain strict requirements here) then the lender is correct again.

Mortgage lenders and closing agents act within strict legal boundaries. They don't knowingly lie to you about these things, but a real estate attorney would be happy to review your documents and let you know if they acted correctly. The fee for this should be minimal.

Answer 5

They can lower the loan amount, but they CAN NOT give you back the money. The answers that came from some of the other people are wrong, you can not get the cash back but they can lower the loan amt.

Joe Bauer
Vice President
Morgage Services
[e-mail]

Answer 6

The first response meant to say "You can't get it back" and she is right. Legally, the seller can give you up to 3% of the property value to pay for closing cost, not for cash in hand.

What the escrow officer said is correct.

Regards

Answer 7

You can get it back.. I work for Lender and that is against the law. Did you get a final HUD with your documents you received from your lender?

Answer 8

Something is wrong here. Go to the loan officer's boss.