Home Buying in 10308>Question Details

charleslanza, Home Buyer in Staten Island, NY

Including Closing Cost in Mortgage

Asked by charleslanza, Staten Island, NY Sun Dec 30, 2012

I would like to include my closing cost, on a new construction home I'm considering purchasing, in my mortgage. At the same time I would like to put 10% down (of the sales price closing cost). Would my down payment be considered 10% or less (i.e. down payment less closing costs / sales price)?

I am trying to obtain the most advantageous PMI, which would be achieved by a 10% down payment. Would purchasing a home where the seller agreed to pay closing cost (i.e. seller concession results in closing costs baked into sales price) help achieve this?

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BEST ANSWER
Feel free to call me to discuss this. I am on Staten Island.

Instead of thinking in terms of down payment it may be easier to think like the Bank. By putting down 10% of Sales price you are trying to achieve a 90% Loan-to-Value ratio (LTV).

In your latest example, if you take your loan amount of $468K and use a $500K Value your LTV is only 93.6%. If you qualify based on all other underwriting standards you can still get a mortgage but you have not achieved your 90% LTV goal that you originally set for yourself.

Best regards,
Will
646-552-2531
1 vote Thank Flag Link Mon Dec 31, 2012
Charles,
With regards to your question about the 28K. Please send me your e-mail address (to willknoop@yahoo.com), and I will gladly send you a spreadsheet with the detail of how to calculate Closing Costs. Keep in mind that with New Construction you generally will pay the Transfer Taxes and other misc. items such as water meter installation on behalf of the builder.

Best regards,
Will Knoop
0 votes Thank Flag Link Thu Jan 3, 2013
Charles,

You are looking to put 10% down. If you have the builder raise the price of the house to cover your closing costs/prepaids, your NEW purchase price is $520 and a downpayment of $52 ( as you said), you now have 10% invested in the value of the home. The bank is going to LEND you 90% of the appraised value or $468.

If the house appraises for $500, the bank is going to LEND you 90% of that value or $450k. The percentage the bank lends you is based on the purchase price OR the appraised value, whichever is LESS.

$20k in closing costs/prepaid on a $500k purchase?? Now THAT is the amount that makes me curious!
0 votes Thank Flag Link Mon Dec 31, 2012
Charles, If you send me an e-mail I will e-mail you back a schedule showing how I came up with the $28K number. Thanks, Will
Flag Mon Dec 31, 2012
Will, is the 28K figure accurate. I received an estimate of $20 - $22K in closing cost on a new construction home with a purchase rice of approximate $400 K. Does that estimate appear unreasonable to you ?
Flag Mon Dec 31, 2012
Hi Lori,
Try not to fall off your chair when you read this, but the Mortgage Tax in NYC on this purchase would be $8,424. The Builder's Transfer Taxes, which for some unknown reason the Buyer pays, would be about $9,490. The Total costs and pre-paids on this transaction would probably be closer to $28,000.

Best regards,
Will Knoop
Flag Mon Dec 31, 2012
Thanks for the responses. Why does the house have to appraise for the sales costs plus closing costs? Wouldn't the loan amount be reduced by a down payment and this be less than the appraised value? Example: cost $500k, Closing costs $20k, down payment of 10% ($52k). The loan amount would me $468k (520 less 52) and thus less than an appraisal of say $500.
I would really appreciate any response. Thanks.
0 votes Thank Flag Link Mon Dec 31, 2012
You need to speak to your mortgage consultant who's already familiar with your financial details for the most accurate advice.
0 votes Thank Flag Link Mon Dec 31, 2012
The question can accurately be answered by your loan officer, therefore you really should consider a consultation.....
0 votes Thank Flag Link Mon Dec 31, 2012
When including the Closing Costs in your Mortgage due to a a Seller Concession. Your Down payment will be 10% of the Total Sale Price including the bump up in price from the Concession.

When using a Sellers Concession to include your Closing Costs in the mortgage, the home you are purchasing must now Appraise for the higher amount (The Sale price including the concession).

Visit the website below to get an idea of what your Closing Costs will be. When buying New Construction you will generally add in the Builder's Transfer Taxes (Not included on the website). You will also be funding your Escrow Account with 2 or 3 months of Taxes and Insurance.

http://www.nysmortgagerates.com/TheCost.html
0 votes Thank Flag Link Mon Dec 31, 2012
If your question is where should the 10 percent down payment be calculated from, it will be based on the agreed purchase price plus the closing costs.

Consult your loan officer as to the max amount that you can add for your closing costs. Also for all other options.

Best.

Maria
0 votes Thank Flag Link Mon Dec 31, 2012
whether your lender will allow you to roll the closing costs into your loan or not is a question for them, Some will' some won't. If you will be permitted to roll the closing costs into your loan then the 10% down will be 10% of the total amount your borrowing. (Home price plus closing costs)

Honestly you would be much better off if you're able to get the Seller to agree to pay all or most of your closing costs.

If you're working with one of the big banks: Wells Fargo, Suntrust, BoA etc you're probably wasting your time, they have been overlaying additional restrictions on all their home loans for some time. You would be much better off if you're able to work either with a credit union or a smaller local bank that does not impose such overlays.

Best of luck to you and I hope you have an exciting 2013.
0 votes Thank Flag Link Mon Dec 31, 2012
You should consult with your loan officer regarding all aspects of the mortgage and down payment.
0 votes Thank Flag Link Mon Dec 31, 2012
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