In the day-to-day real estate practice, everyone does it backwards. Instead of determining the purchase price including the concession, they determine the seller's net and then add anything you're requesting as seller concession. This is why it appears to be that you're adding on to the sales price.
In reality you're not financing the seller concession, it's actually being gifted to you by the seller(s).
I strongly suggest that you speak to your attorney, they should be able to explain this better than anyone invoked, though your Realtor should have been able to as well. If you need a Loan Officer to help you through this, I'm always available to meet face-to-face in our Nassau County offices. Good luck!
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Senior Loan Officer
STERLING NATIONAL BANK
310 Crossways Park Drive
Woodbury, NY 11797
As Javier suggested, your attorney and agent should really explain this very important component of the transaction with you. That said, if the contract is fully executed (signed by buyer and seller) it's too late to make any changes. Your focus now should be to minimize your closing expenses and get the mortgage best suited to your needs. There are many options available to reduce your closing expenses, especially if you are a union member, educator, health care professional, law enforcement/fire fighter or city, state or federal employee.
I have extensive experieince helping buyers become successful homeowners with affordable and simple mortgages. For more info or assistance, I can be reached directly at 917.699.0183 or via email.
I value your opinion, please hit the thumbs up if my reply was helpful. All the best.
Michael Denniston l Cell: (917) 699-0183
Residential Home Funding, Corp.
Licensed Mortgage Loan Originator l Sales Manager
6901 Jericho Turnpike Ste. 219 | Syosset, NY 11791
Main: (516) 605-1733 | Fax: (888) 881-2557
NMLS # 24076 | Company NMLS # 34973
You're not getting the seller's concession for free as Mark mentioned below correctly. With the seller's permission, the bank is allowing you to roll in a portion or all of your closing cost, and as a matter of fact allowing you to do so could be considered a disadvantage to the seller. Here's why, (using a similar example as below) if you are purchasing a home for $280,000 and need a $10K seller's concession (increasing the purchase price to $290K), the seller will net $280K but will have to pay transfer tax on $290k for the extra $10K. The seller does not get to pocket the extra $10K and therefore gain no financial benefit other than perhaps to get the house sold.
HOWEVER, now that the market is shifting, that is inventory shortage and multiple offers for the same home, a buyer wanting a seller's concession will be at a disadvantage in a bidding situation for the reasons mentioned above.
All the best with your home search.
Janet Nation, CBR
Sailing Home Realty
Licensed Real Estate Salesperson
Seller contribution can be put on top and included in the purchase price - in this case
the seller does not loose any money by contribution, and buyer wins buy getting their closing costs paid by the seller (instead of laying cash out at closing, which the buyer may or may not have).
Or, a seller can agree to pay the closing costs without them being added on top.
However, in certain types of loans, buyers get confused - and it's their MIP (in FHA loans) that
gets added on top.
Best way to find out what's what is by reading your contract, Good Faith Estimate from your lender,
and asking questions of your agent/mortgage pro.
You may want to ask questions like: "What is the best way for me and why?", "Which way saves me more money in a short/long run?" Once you get your answers - decide which way works best for you in your current situation.
Of course, in every negotiation seller and buyer have to agree on all terms.
Hope this helps,
Beachfront Realty, Inc.