My husband and I have been approved for 100% financing to buy an new house. We don't have any money for the

Question

closing costs. This is both of our first time buying a house so I'm just a little confused. What is the closing cost for? How can I get money to pay that? How much does it usually cost? Sorry if I sound ignorant, but I need some help.

Answer 1

Your best option is to ask for what is called a seller concession or seller contribution. This is where you place in your purchase contract that the seller is to pay a certain amount or percentage for your closing costs. A 3% seller concession is normally good for most situations and 3% is normally the most that most lenders will allow you to receive in acceptable contributions on 100% financing. Normally, this is worked into your purchase agreement when you are bidding on a home and your Realtor or your mortgage agent should have let you know about this option. If you already have a purchase contract in place, don't worry, talk to your Realtor and let them know that you need a seller concession. Chances are it will not be a problem to work it into the contract still at this point. You will most likely just end up financing a little more. See the link below for more information on seller concessions.

Answer 2

I am a certified Mortgage Planner.

Are you pre-approved or pre-qualified? Completely different animal.

While I don't necessarily agree that you are sub prime waiting to happen, since there are few sub prime lenders out there doing 100% financing anyway unless your scores are really high, you are a risky for a lender.

Here is why. Since you are "approved" for 100% that means you can include your closing costs into the financing using something called sellers concessions. You are allowed (by the seller and the lender ) to have up to 6% of the purchase price added to the home price to cover costs. It must be included prior to submitting your loan and the home must be able to appraise and the MLS listing must not be more than the whole cost. Are you confused yet?

You need to sit with a mortgage planner (not an LO or a bank) and plan how you are going to do this. You need to understand the 3 C's (capacity - what you can really afford, credit - what yours looks like and how you can improve it if needed, and finally collateral - the homeyou can afford).

You need to know this before you make a huge error and it ends up costing you something you really want a home.

As far as how much are closing costs, depends on the loan you are looking at. Average costs range from 3-5% of a purchase price (they can be higher - don't freak yet).
Closing costs consist of the the planners fee (mine is 2%) the lender can pay a portion of this. Credit report fee, flood cert, prepaid interest, lenders fee, title insurance, recording fees, brokers fees, application fees, on and on.

This is purely my opinion, take it for what it is worth - it doesn't sound like you are really pre-approved for a mortgage. You should know alot of this already. You should have received a package of papers to look at and sign. Included in this is a Good Faith Estimate of costs. A Truth in Lending which details rates and APR. And a whole lot more.

I would like to talk to you - to find out if there is anything I can do to help in finding you someone in your area that can really help you. I am happy to be a resource for you. I may not be licensed in your state currently(I don't know where you are) but I have done loans in 46 states over my career. You can reach me anytime
Nichole
517-749-0961
[e-mail]

Answer 3

Closing costs are generally 2% of a loan value. If the percentage is higher, someone is jacking you, shop around for better terms. Costs covered are title insurance, fees to everyone and their mother and escrow for insurance & taxes.

In a soft market, you could ask the seller of the property to pay your closing costs when you make an offer. Say you plan on offering 10% less than asking price, go 5% less and seller pays closing costs.

Another option is to roll the closing costs into the loan amount: this is not as good of a deal for you. Your loan will be for more than list selling price and eat up any equity you have.

A better question: if you have no $$$ can you afford a house? Could you write me a check for $1000 without killing yourself? If not, how would you pay for a new refrigerator or furnace if it broke down? You may want to get in a better financial spot before buying. Good luck.

Answer 4

I work with loans like this all the time, and really, these are becoming the norm. I won't tell you that you're not ready to buy the house if you can't pony up money at close, but I will tell you that if you're going conforming, depending on how the purchase agreement is set up, you can have the seller pay 3% of the loan toward closing costs. 6% if it's My Community. Now, the bad part of this is, since you're going into this at 100% LTV, you're setting yourself up for a hard time ahead for refinancing your mortgage, because we're in a market of declining property values. They will go up in the long run, as housing always has, but for the short term, it will drop. Now, 100% financing isn't a good idea, but it gets you into the house, and if it appraises for significantly higher than what you bought it for, you only have to wait 6 months to refinance and lower your MI factor.

Answer 5

well if you approved for a 100% financing and dont have money for closing cost heres a lil thing you can do. depending on where you live here in califorina we have this new program that offers you 20% down if you cant get 100% finance. if you only need closing cost fee's they can help you pay for that as well the only prob is if you decide to sale or take money out of equity from the home they will be asked to pay them back if you dont do so with in 15 years then you dont have to pay them back at all.. look into fha loan

Answer 6

Closing costs are basically paper work costs and can be waived or rolled into a mortgage. You sound very new to this so I would suggest a few things be checked.

1) Bank vs mortgage company. Banks are stricter but cheaper. Mortgage companies can be notorious for taking risky loans and will ask what they think you will pay not what they can give you, so you have to negotiate with them. You have to know where you stand before accepting their offers.

They have been known to send blank loan sheets and up the percentage, sell mortgages, demand in full etc

2) Some mortgages allow you to pay more towards the amount owed while others will allow you to only pay more to next months mortgage.
Being allowed to pay more to the amount owed is critical, as it reduces the total amount paid in the end. Example. If you pay 10$ extra now, thats 30 years of intrest you wll save on that $10 could save you $50. On mortgages that dont allow that you will have to pay the full amount, the extra money down will only end your payments early and make them happy

You want a buy out option so that should you inherit money you can pay the value of your mortage with out the intrest. If you pay it off now why should you give them the extra 200% of intrest?

You want to be sure they are locked in also so they can not bump you out if rates go up and you are paying a low rate.

Investigate now.

Answer 7

Sounds like you're a sub-prime loan waiting to happen. I'm not trying to be mean, but if you have to get 100% financing and you don't even have money saved for closing costs, then you aren't ready to buy a home. There are a lot of costs that will come up that you aren't prepared for.
Plus, if guarantee the loan you are getting has horrible terms. Think about it- you default on the loan in a few years and the bank gets the house including any equity you've earned.
BAD IDEA

Answer 8

Usually the seller pays closing costs, but you would negotiate that into your agreement.

Honestly, though, if you can't afford a few thousand for closing costs, then you have no business buying a house. You'll have to pay for your 1st year's worth of insurance all at once BEFORE closing, and that'll be over $1,000 alone, plus you'll have inspections.

I bought my first house with 0 down. I had about $15,000 saved up, and with insurance, inspections and improvements, I blew through that in a couple months.

You should have SOMETHING saved before you buy a house.

Answer 9

Hi "Amie g"

Don't know if this answer has been given previously, but closing costs are the costs paid by either buyer or seller at closing. (1) Closing costs are for such items as the realtors commission; points associated with the mortgage; taxes; notary fees; document preparation, etc. (2) Some sellers are willing to contribute to the buyers closing costs; Also you may be able to get a relative to gift you some of the funds (cannot be a loan) (3) Costs varies - you may want to "estimate" at least one percent of the total price of the home (i.e., home price: $200,000. / Closing costs: $2,000.

finan7

Answer 10

Closing costs are fees that you and the seller have to pay. There are buyer-paid closing costs and seller-paid costs. Examples are appraisals, loan origination fees, points, surveys, pre-paid taxes, etc. Usually between $1,000 and $5,000.

Your lender can definitely offer you some options to have low closing costs. You can borrow additional money, or the lender can charge you a higher APR (which means higher monthly payments). Try and think of it as a sliding scale. You can choose to have higher closing costs and a lower monthly payment or, in your case, lower closing costs for a higher monthly payment. One way or another you're going to have to pay for these fees.

Be careful. Your additional expenses will add up faster than you could ever imagine. I recently bought my first home. It will suck money out of your wallet like its a black hole. $600 trips to the Home Depot are a weekly occurance. I bet I spent close to $15k in the first 2 months. Make sure you account for this when you are budgeting.

Good luck!