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Home Buyer in…, Both Buyer and Seller in 30188

Can you make an offer on a house and as part of the offer ask for cash back at closing?

Asked by Home Buyer in Georgia, 30188 Wed Aug 13, 2008

We are looking at a home to buy but our down-payment money is tied up in our current house (not sold yet). Could we make an offer on a home and as part of the offer, ask for money back at closing? I would assume as long as the home price is within the limits of the loan for that specific house and the seller has at least that much equity it would be ok...

(EXAMPLE: Home price- $199,000, Offer $205k with $10k back at closing so seller gets $195k- $4k less than asking price and we would have money for a down payment- we can borrow it from family before-hand for a short amount of time.)

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choose a reputable lender before you make an offer and check with him or her to see what the guidelines are for the loan program you intend to use.

many lenders allow a seller credit towards your closing costs. i have seen some as high as 5 or 6% of the purchase price, and many up to 3% for actual closing costs.

the key is that the credit is specifically described as a credit towards actual closing costs and pre-paid expenses, AND that the amount is acceptable to the lender.

as always, i suggest that you retain a competent real estate lawyer to help you as you go forward
1 vote Thank Flag Link Wed Aug 13, 2008
Amy most mortgage companies only allow up to 3% credit back to a buyer at closing and it has to be applied toward closing costs. lenders usually do not allow cash to go from the seller to the buyer at or after closing.
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Thu Dec 4, 2008
Amy, As others have said, this won't work. As part of the mortgage process we need to verify where all the money needed to close is coming from, and a seller credit is not an acceptable source. You would also, as Greg said, need to be able to qualify for both mortgage payments - even if you did have a lease for your current home.

On another note, this isn't the kind of market where you want to buy before selling. Having 2 mortgage payments is stressful in the best of times, and in a market like this it can be a disaster. There are bargains to be had, but the best thing you can do is sell first and come in as a much stronger buyer.
Web Reference: http://ptmortgage.com/blog
0 votes Thank Flag Link Thu Dec 4, 2008
1. You will need a signed purchase contract or lease to offset the PITI payment on your existing house so unless you have that or can qualify for 2 payments it's not happening regardless.
2. Banks consider the sales price to be the lower of the purchase price & the appraisal. While they will allow sellers to pay closing costs what you propose means that the home is effectively worth $10k less than your purchase agreement and that's the number they will agree to finance.
0 votes Thank Flag Link Fri Aug 15, 2008
Hi Amy-
It has been my experience, that this is not allowed on the HUD statements any longer. Creative financing was prevalent a couple of years ago, but there are strickter guidelines surrounding what can and cannot go on the HUD. Find yourself a good real estate attorney, if you don't have one, I do. But, again, it has been my experience that there is no cash back option any longer.
Hope that helps.
0 votes Thank Flag Link Wed Aug 13, 2008
It really depends on what you use the credit for. Some of the new laws that were recently put into effect by President Bush won't allow any of these credits after October 1st, so make sure you talk about this to a "good" mortgage broker or bank.
0 votes Thank Flag Link Wed Aug 13, 2008
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