Question about FHA Loans and closing costs

[Anonymous]

I will be getting an FHA loan and I was wondering if closing costs can be rolled into the loan if the house appraises for higher than the loan.  For example if I have an agreement to purchase 1/2 of a duplex for $125K, but it appraises for $150K can I roll the closing costs over?

I know that the Tax credit can now be used as a bridge loan, but I didn't really want to do that, so I was wondering.

Thanks!

[Anonymous]

Yes.  You offer the person a certain price and have them pay the closing costs....For example

You offer them $130,000 + $5,000 for closing costs...then you pay your down payment and the closing costs are essentially included in the loan.

[Anonymous]

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@Anonymous wrote:

Yes.  You offer the person a certain price and have them pay the closing costs....For example

You offer them $130,000 + $5,000 for closing costs...then you pay your down payment and the closing costs are essentially included in the loan.

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Thanks for the response, but I didn't mean it that way though, because it's a short sale, and the owners/bank won't/can't do that. If the bank approves the sale they're going to lose money and the owner doesn't even have the money to provide a survey.  My understanding when you do that is that while in the long run you're paying the closing costs with your loan, since your loan is higher, the actually money comes from the sellers in the short run.  IE, they bring $5K to the table, or the profit from the sale of their home is used.  In my case there is no profit, and the sellers are litterally five minutes from the bank foreclosing on them.

I literally meant asking my bank to give me a loan for more than the purchase price of the home with the intent of having the loan pay the closing costs.  

[ShanetheMortgageMan]

The bank approving the short sale can do whatever the heck they want.  They can say they won't permit the seller to pay any of your closing costs, or they can say it's perfectly fine.  So the bank can do that, it's just that if they want to or not.  You just have to ask, and you just have to wait for a response.  I've had buyers offer on short sales and had their entire closing costs paid for.  I have noticed some real estate agents telling their buyers that short sale banks will not permit the seller to pay buyers closing costs at all, but I've noticed most of those agents who say that have no or very little short sale experience.

The answer to your question though with an FHA loan though, is no.  The only way to have your closing costs not paid by you out of pocket is if another party is paying them for you at the closing - can't directly wrap closing costs into the amount being financed.

[Anonymous]

Thank you, Shane.  I figured that was probably the case, but knew you or one of the other mortgage loan experts would know. 

In my case, I think the sellers literally have no money.  The place is competely vacant.  And if the sellers had the money, well it's too late now.  

Thanks again!

[BrianB_The_Loan_Professor]

Like Shane said though just offer what you want with the costs rolled in the bank will see their bottom line and either accept it or reject it

You wont know if you dont ask

B

[Anonymous]

Have you looked to see if there are any downpayment assistance programs in your area? Your lender may know of them too.

For example, i live in New Hampshire and New Hampshire Housing has an "advantage" program up to $10k that can be used for downpayment and closing costs in combination with FHA. They require us to bring 1% to the closing table and when we sell or refinance we'd have to pay it back. There are a couple other minor conditions... we have to take an 8 hour class for first time homebuyers and we can't have over $3500 in liquid assets remaining at closing.

They have another program that's up to 4% of purchase price and doesn't have to be paid back if you keep the home for 4 years but the interest rate is a bit higher and in our case it would be just enough to cover the downpayment (about 8k).

Can't hurt to look into programs in your area

[Anonymous]

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@Anonymous wrote:

Have you looked to see if there are any downpayment assistance programs in your area? Your lender may know of them too.

For example, i live in New Hampshire and New Hampshire Housing has an "advantage" program up to $10k that can be used for downpayment and closing costs in combination with FHA. They require us to bring 1% to the closing table and when we sell or refinance we'd have to pay it back. There are a couple other minor conditions... we have to take an 8 hour class for first time homebuyers and we can't have over $3500 in liquid assets remaining at closing.

They have another program that's up to 4% of purchase price and doesn't have to be paid back if you keep the home for 4 years but the interest rate is a bit higher and in our case it would be just enough to cover the downpayment (about 8k).

Can't hurt to look into programs in your area

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Great idea, unfortunately or fortunately, depends on how you look at it, all the programs I've found in my area have income limits, and my promotion last year took me right past those limits.  But I would definitely tell anyone who was looking to buy a house to look into those programs as well.

[Anonymous]

Whether or not the owners have money has nothing to do with if the bank will accept closing costs.  The only difference is if there are multiple offers they may look at the bids based both on price and ease of transaction.  For example...

You want to bid 130K with seller paying 5K of closing costs (effective bid of 125K for house)  

Another bidder bids 122K with no concessions

A 3rd bidder may bid 118K cash

It is quite possible a seller may take the 3rd offer because as a cash offer, it can close almost immediately and there will unlikley to be any surprises.

They may prefer the 2nd because it is a little higher but is a straightforward deal.

The may prefer the 1st because bottom line is higher. 

Each bank handles things differently and each market differently.

Also, the closing costs would be paid out of escrow from the loan funds if they wer paid via sellers concessions so there is no need for anyone to cough up dough up front on the sellers end.