Is it possible for a first time buyer to roll closing costs into the mortgage in order to not deplete savings?

Asked by Alicia, Jacksonville, FL Wed Aug 27, 2008

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Kim Dove, Agent, Jacksonville, FL
Wed Apr 1, 2009
My name is Kim Dove and I am a Realtor that specializes in first time homebuyers. I work with my lenders and buyers to obtain the maximum amount of down payment and closing cost assistance. This can be up to $39,999 depending upon income, family size and credit.

Making sure my buyers come out of pocket with the least amount of money is my specialty.

Please call me if I can assist you. (904) 962-8404.
0 votes
Julie, , 33901
Tue Mar 31, 2009
RURAL DEVELOPMENT LOAN DEPENDING ON AREA UP 102% FINANCING OF APPRAISED VALUE TO ROLL IN CLOSING COST NO MORTGAGE INSURANCE
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Kuleen, , Houston, TX
Wed Aug 27, 2008
That is incorrect. Oct 1st eliminates seller funded down payment assistance. After October 1st you will be required to bring a minimum of 3.5% to closing. This can still be a gift from a friend, or family member. Local and State funded DPA's will still be available.

Even after October 1st you will still be allowed to roll in all closing costs up to 6%. Many times the closing costs can be equal to the down payment or more.
0 votes
Trace Reynol…, Agent, Jacksonville, FL
Wed Aug 27, 2008
Hi Alicia!
My name is Trace, I work for a homebuilder here in Jacksonville . I have read a few of the other answers to your question and I agree with a lot of them, however, I have been told that the first time buyers programs are going out the window on October 1st. due to a governmental ruling. If this happens, this means that closing cost can not be rolled in to a loan, but as of right now, most of them can. If you purchase now and get your purchase agreement locked down, you could close before October first and use the Ameridream program or the Nehemiah program which can assist you with closing cost. Of course it just so happens, that the builder I work for has 2 ,brand new concrete block homes that can be sold and closed before the programs go out the window. If you are interested contact me. Thanks.
0 votes
Kuleen, , Houston, TX
Wed Aug 27, 2008
Yes it is possible and you can roll in all closing costs. There is a way to structure the deal and the property must appraise so that the amount can be rolled in. Your realtor will have to structure the contract. This structure is called a seller concession. If you decide to take and FHA loan 6% can be applied towards closing costs.

If you are interested receiving some competitive rates quotes please call or email me. Iwayloan is a mortgage banker as opposed to a broker.

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Lucien Vaill…, Agent, Jacksonville, FL
Wed Aug 27, 2008
Hello Alicia

The short answer is yes but not just by adding the closing costs on top of the loan amount. Here are some details for you.

Conventional loan scenario - The seller or other interested party (anyone connected to the transaction) may contribute to the buyers expenses. The amount of the contribution is based on the LTV ( loan to value ratio). When the LTV is above 90% the limit is 3%. When the LTV is 90% or lower the limit is 6%. For example if the sale price is $200,000 and the buyer puts $20,000 as a down payment the LTV would be 90%. The seller would then be alllowed to contribute up to $12,000 towards the buyers closing costs and expenses.

FHA loan scenario - Seller can contribute up to 6% towards buyers closing expenses. With the passage of HR 3221 effective October 1, 2008, the minimum required down payment will be 3.5%. This means you will still need to contribute money toward the transaction.

VA loan scenario - Seller can pay all of the buyers closing expenses even with 100% financing.

It is important to note that each of the above loan scenarios assumes that the seller is paying the closing costs for the buyer. This means a reduction in the net proceeds to the seller at closing. If the seller is not willing to give up that money you can increase your offer by an amount equal to your expected closing costs. Most sellers will agree to this since it will not significantly reduce their bottom line. This means that the home must appraise for the higher amount or the lender will not make the loan.

Considering the current market conditions most sellers will probably entertain an offer that includes paying some or all of the buyers closing expenses in order to get their home sold. If you would like some help preparing an offer and arranging favorable loan terms let me know. Good luck with your home purchase.
0 votes
Matt Zimmerm…, , Jacksonville, FL
Wed Aug 27, 2008
Hi Alicia,

Great Question and very timely! I would have to answer this question by asking another. Are you considering conventional financing or perhaps FHA? If you are looking to finance your home via FHA, sellers are able to pay up to 6% towards your closing costs and down payment. Allowing you to keep your hard earned dollars in the bank! However, this will change effective October 1st of this year. Historically sellers have been able to "Gift" the down payment funds (approx. 3%) to the buyer at closing. The recent housing stimulus bill that was passed by congress has eliminated this loop hole. In addition the down payment requirement will increase from 3% to 3.5% on all FHA loans. I know that sounds bad...but here is the GOOD news. If you are a first time home buyer you will qualify for up to $7500 in tax credits!! In most cases more than enough to cover your costs.

Sellers in most loans are still able to pay for buyers closing costs up to a certain percentage based on lender requirements. So I guess if you are looking to utilize down payment assistance programs you need to find a house and close on it by October 1st of this year.

If you would like additional information or if I can assist you further, please don't hesitate to call or email me today!!

Matt Zimmerman
Broker Associate
Prudential Network Realty
(904) 514-2466
Web Reference:  http://www.MattSellsJax.com
0 votes
Christy Crum…, Agent, Emerald Isle, NC
Wed Aug 27, 2008
A lot of 1st time buyers ask the seller to pay all or a portion of their closing costs. Most lenders will allow the seller to pay up to a certain percentage.
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Sandra Brown, Agent, Jacksonville, FL
Wed Aug 27, 2008
Since I am a realtor and do not have all details on lending, I can not answer that but I do have some great reference persons who would be delighted to talk with you. Please call me at 904 333-8728.

Sandra Brown
Prudential Network Realty
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