Do you need to reduce your closing costs?

August 10, 2022

If you’ve been saving for the down payment for a home here in Pittsburg
and have finally gotten there, only to learn that now you must save
for the closing costs, there is a solution.
Every mortgage loan comes with closing costs. There are lender fees
for origination, document preparation, and underwriting. In addition,
there are non-lender fees such as title insurance, appraisals,
attorney or closer fees, and inspections.
These can add a few thousand dollars to the funds needed to close your
Pittsburg home purchase.
How can you reduce that amount?
calculate costsOne common method is to simply ask the seller to pay them – or to
pay up to the allowed percentage. VA loans, for instance, allow the
seller to pay up to 4% of the purchase price in buyer closing costs.
Other loan programs have different regulations, so this is something
to discuss with your lender.
The second method – should the seller be unwilling – is to add the
cost of the fees to the agreed purchase price with the understanding
that the additional funds will be paid toward your closing costs.
Again, you first need to know the regulations, so talk this over with
your lender in advance.
Your agent must know how to explain this process to the seller’s
agent and/or to the seller in the presence of his or her agent. Since
this increases your loan amount, your monthly payments will be
slightly higher, but only slightly. At 4% interest, a $2,000 increase
in the purchase price would increase your payment by a little less
than $10 per month.
Third, you can ask the lender for a credit toward your closing costs
in exchange for paying a slightly higher interest rate.
interest rateAgain, this is something to discuss with your lender. Ask him or her
to show you your options with regard to closing cost, the
corresponding interest rate, and your monthly mortgage payment. Just
as you can pay “points” to lower your interest rate, you can
receive a lender credit by raising your interest rate.
One point is equal to one percent of your loan amount, so if your loan
will be $200,000 one point will equal $2,000. By raising your interest
rate by 1/8 to ¼% you could receive a one point credit, or $2,000
toward your closing costs.
Before making a decision, do the math. Your lender should be willing
to help you determine how each different scenario will affect you both
now and over the long term.
If you’re ready to talk with a lender, I’ll be glad to refer you
to loan officers hre in Pittsburg who have helped my clients in the past.
And, when you’re ready, I’ll be glad to help you find the Pittsburg
home that fits both your budget and your lifestyle.

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