Home Buying in Middletown>Question Details

Bill, Home Buyer in Madison, CT

can bank pay closing costs AND my down payment?

Asked by Bill, Madison, CT Thu Mar 31, 2011

first time home buyer. im new to this. im looking at a house thats bank owned and needs some work. has been listed for 4.5 months. im looking into the fha 203k rehab loan. the asking price is $100k. renovation im guessing to be about $20k. iv heard that in some cases there can be a stipulation in the offer that the bank pays all closing costs and fees. im happy with $120k in total sale price of the home. if i offer to pay full asking price for the property would it be possible or even legal to stipulate that the reo bank pay my down payment? has anybody ever heard of this? the fha 3.5% should be $4200.

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Hi Bill, my name is Patrick James, and I am an agent that covers your area. Are you currently working with an agent?

The bank can not and most likely will not pay your down payment. You have to source the funds. FHA down payment funds must come from a verifiable source, such as the borrowers' bank account. Unacceptable sources for funds include credit cards, personal loans or cash on-hand that has no paper trail. Acceptable sources include stocks, mutual funds and retirement accounts. FHA requires at least two months' seasoning on down payment funds, i.e., a borrower must supply the most recent account statements.

You could certainly ask for the REO bank to pay closing costs, and if it is fannie, freddie or HUD, they usually allow 3.5% in closing costs. So they would pay attorneys fees, and benk fees, prepaids, taxes etc, saving you from having to take that money out of pocket at closing, so then you should have the 3.5% for the FHA down payment, not having those closing costs to pay for.

If you would like a referral for a mortgage broker(s) you can talk to, and if you are not working with another agent under contract, feel free to call me at (860)316-2569 or email pwjrealtor@gmail.com with any other questions. Take care, and have a good night!
1 vote Thank Flag Link Thu Mar 31, 2011
Bill, I agree with many of the points that were made in earlier responses but it truly will depend on who the bank owner is and what their exposure is regarding this property. Remember that banks run their business based on margins and if what your asking for doesn't fit that particular model, they'll move on to the next offer! My advice is to offer less than the listing price to offset your closing costs and use another resource other than the seller for your down payment.

Regards,
Kevin Geysen
Web Reference: http://www.rivertoshore.com
0 votes Thank Flag Link Thu Mar 31, 2011
BILL YOU MUST PUT 3.5% INTO the transaction if its an FHA loan. Seller credits and pre-paids will not cannot be applied to the 3.5% down payment required by FHA. Talk to the listing realtor to see what your options are


Best of Luck!
0 votes Thank Flag Link Thu Mar 31, 2011
Hi Bill,
you have asked some very good questions, let me try to address them. let's start with the bank owned house. Depending on which bank it is, there may be financing with rehab available from the lender, their terms can vary depending on the lender and the program. The more conventional FHA 203K rehab loan does require a 3.5% down payment. Sometimes, though, the banks will pay your closing costs. There are first time buyer programs in CT that allow for 100% financing, but this is not rehab money. Would have to be on a property that is in good condition. The best way to get started, as you said you were new to this, is to enlist the assistance of an experienced and knowledgeable agent. don't be afraid to ask for qualifications, sales history and if they are willing to help you research the various options. A good agent can help you find lending programs that fit your needs.
Web Reference: http://jeanneshouses.com
0 votes Thank Flag Link Thu Mar 31, 2011
A "thumbs up" to Patrick's answer!
Web Reference: http://www.CarlGuild.com
0 votes Thank Flag Link Thu Mar 31, 2011
No, you need to have some "skin in the game" as they say. Some states have down payment assistance programs (basically in the form of a 2nd mortgage) that you have to repay.
0 votes Thank Flag Link Thu Mar 31, 2011
Unlikely that they would pay the down - but if you are seeking financing with the bank that owns the property - in other words, they are going to loan you the rest of the money to buy the house, it never hurts to ask! Ask your agent to find out from the listing agent what your financing options might be from the bank that owns the house.

Good luck!
0 votes Thank Flag Link Thu Mar 31, 2011
Bill,

If you're getting an FHA loan, the seller/bank cannot pay your down payment. It must come from you, or be a gift or other eligible source of funds. Your loan officer can provide you with the options.

Best of luck,

Rob Spinosa
0 votes Thank Flag Link Thu Mar 31, 2011
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