Builder Paying Closing Costs?

Anonymous · ‎08-27-2012

My husband and I recently were preapproved for a mortgage, and we have found a property that we want to put an offer on. It is a townhouse that is brand new, and getting the finishing touching right now (carpet, countertops, etc). We do have some money in savings that we could use for closing costs, however we would rather keep that money liquid and have the seller pay the closing costs. They are a smaller company and do not have a preferred lender, how likely is it that we will be able to get them to pay our closing? We are planning on putting in the offer today or tomorrow, and I am nervous because we have really got our hearts set on this townhouse. It has everything we want in the location that we want, but if we have to cover all of our closing costs I don't think I will be comfortable going forward with it. I don't want to have to start out living in a new home without any money in savings. Our realtor and LO have both stated that most companies and private sellers expect to pay closing costs, and that they do pay them 90% of the time...but I am not sure how that works with a builder.

StartingOver10 · ‎08-27-2012

@Anonymous wrote:
My husband and I recently were preapproved for a mortgage, and we have found a property that we want to put an offer on. It is a townhouse that is brand new, and getting the finishing touching right now (carpet, countertops, etc). We do have some money in savings that we could use for closing costs, however we would rather keep that money liquid and have the seller pay the closing costs. They are a smaller company and do not have a preferred lender, how likely is it that we will be able to get them to pay our closing? We are planning on putting in the offer today or tomorrow, and I am nervous because we have really got our hearts set on this townhouse. It has everything we want in the location that we want, but if we have to cover all of our closing costs I don't think I will be comfortable going forward with it. I don't want to have to start out living in a new home without any money in savings. Our realtor and LO have both stated that most companies and private sellers expect to pay closing costs, and that they do pay them 90% of the time...but I am not sure how that works with a builder.

Works the same with a builder. Make sure you ask for closing costs and pre-paid expenses so you don't short yourself.

If you age getting a conventional mortgage the max allowed is 3% of purchase price toward your costs. FHA the max allowed is 6%. Find out from your lender what the costs are likely to be and use that figure. Check the contract to see if the builder is sliding over some of "his normal expenses" to you. That is pretty common with new construction. Make sure you see and read and understand his contract before you sign it.

imandy · ‎08-30-2012

It's really going to depend on how good of a deal you got on it and what it's appraising for. The builder wants to sell it more than you want to buy it so will make the numbers work as long as it is under the appraisal amount or you'll have to bring more money to closing simple as that.

They can roll the closings costs into the sales price to get you under 3% or 6%, but again you have to be under the appraised value for the bank to loan you the money. But if it appraises at 200k as an example and your contrat is for 200k you don't have a lot of wiggle room to move numbers around.

Anonymous · ‎08-30-2012

Thanks! We put an offer in on Tuesday night. We are supposed to be hearing back today by 5pm. They are asking 141,900, after talking to our real estate agent and checking some comparables we offered them 145,000 on the condition that they include several upgrades (fireplace, granite, etc) and pay up to 4% in closing. Hoping they take it...but I am nervous about appraisal. We are in a growing market, so I am hoping they appraise for a little more than the asking price.

imandy · ‎08-30-2012

Try to find out what the contract amount is on other properties in the same development or what the sales price was if there were any recent sold. If it is new construction it should be easy to get. Your realtor can simply call up any other realtor and ask them if they haven't closed yet.

Appraisals are hit and miss and very difficult. Some will do a great job and really pull comparables that are true comparables and others will just find any old listing they can and collect the appraisal fee and spit out a number. I had two on mine because I had to switch banks and they required it. One came back at $180k and the second came back at $173k. The difference between the two is the one that came back at $173 was lazy and compared our property to similar properties in the NEXT county and a totally different school system, and the one that came in at $180 compared to others in the same school system and same county. I was putting 25% down so it didn't matter to me in order to qualify for financing but it is still upsetting to have to deal with lazy people.

Also...word of advise even after you go into contract please realize that your closing costs are negotiable. My first bank wanted a 1% origination fee and the second bank wanted 1% and then put in a bunch of fees that equaled 2%. Just by asking the second bank came down to 1.5% on the origination fee which was a savings of almost $1000 for me!!! Your origination fee should be 1% and cover everything the bank does except credit report and appraisal...if there is anything else on your GFE like "processor fee" or things like that it needs to be negotiated to zero. 1% origination fee is standard and should cover EVERYTHING the bank does except appraisal and credit report fees.

Anonymous · ‎08-31-2012

Thanks! Our offer was accepted, so they are covering all of our closing costs, yay! We are doing a loan program that is regulated by our state, and the closing costs are all standard for the program so there is not much we could do to negotiate them.