We've been told by a couple lenders I am approved for about 115K loan. I have 1k for earnest cash up front. I called today and was informed that the closing costs would need to be either paid for by seller or my wife and I. This was not explained to us upfront good thing we didnt go further yet.
My question is they told me we cannot role the closinig cost into the loan which I was under the understanding that USDA would allow those costs to be rolled into the loan like the guarantee fee. Is this true? I have read here its not recommended to do that though but not my question though.
Also here in California we have a program called CalHFA would helps with a downpayment or/ closing cost of 3% which would not have to be paid back till loan is either paid off, sold or refi. I looked at the program and says it can be used for a USDA loan but lender says it would not be enough to cover the fee's of closing on that 115K. even with the 1K & 3%. est. was 4496 closing costs. One lender says I cannot use the CalHFA for USDA Loan.
This is really killing our dream of owning a house for the first time we have worked very hard on this paying off 11K in 8 months so far (auto loan) for this purpose. Please Help.
Is anyone familiar with the closing costs and CalHFA here in California? Any Help very much appercaited.
In order to finance (roll) closing costs into the loan, the property has to appraise for more than the contract price. So if the property appraises for 120k and your sales price is 115k, you can finance 5k of the closing costs. The amount financed cannot exceed 102% of the appraised value and you must make sure financing the closing costs still keeps you within your lender's DTI guidelines.
I can't offer insight into the CalFHA program, but I think you should be aware that you will need more than $1k in up front money. You are required to pay for your appraisal and inspections prior to closing- if you don't have money set aside for those costs, you will need to keep saving before moving ahead with your purchase
The CHDAP provides a deferred-payment junior loan – up to 3% of the purchase price, or appraised value, whichever is less, to be used for down payment and/or closing costs. Closing costs can equal up to 5-6% of sales price.
So even though USDA covers 100% of down payment, CHDAP would only cover a 3%of the closing costs. You still need to come out of pocket for the other 2-3% unless you can get lender or seller credit.
You paid off $11k in 8 months which is terrific!
Continue on your journey by saving for the next 5 to 6 months so you have enough to not only pay the difference in closing costs, but have a cushion to actually move into your new place with a little breathing room. As pointed out earlier, there are other costs involved with purchasing a home (inspections). Just having $1k to work with is not really a feasible plan to buy a home. But you are well on your way to getting a nice home if you keep up the savings you have been doing for the past 8 months.
This is from USDA guidelines:
The maximum loan amount is 100 percent of the appraised value plus the upfront guarantee fee.
The loan may include the purchase price and eligible closing costs/pre‐paid items up to the appraised market value. The entire upfront guarantee fee may be included into the loan above the appraised market value. Approved lenders are responsible to ensure individual investor guidelines are met.
There are no maximum purchase price limits. The applicant’s debt ratios and the maximum income limits for the county will determine the amount of loan for which they qualify.
We went through this while trying to a buy a house since October. This has been one of our issues (among many other complications, but that's another story). Basically, you can roll the closing costs and pre-paids in the cost of the house as long as several things take place. First, the seller has to agree to the closing costs and pre-paids being paid, and then you have to raise the offer on the house to include those. Then, the house has to appraise for over that final amount.
So, for example, if you have been approved for $115k, and you find a house that has an asking price of $95k, and the closing costs and pre-paids are going to be $5500, then you have to first get the sellers to agree to "pay" for the closing costs/pre-paids in the contract. Then, you have to add $95k and $5500 together which is $100,500 and make that your offer on the house, but you have to make sure that the realtor checks the box and fills in that your seller is going to cover the closing AND pre-paids. Basically you are rolling over the costs and pre-paids, but by raising the offer price, the seller is not going to be out any money. Then, you have to make sure that the house appraises over $100,500.
Of course, I live in Kentucky, and things could be different, but this was our experience. Also, I am no expert, I just speak from the experiences I have had. Good luck to you!
We found a nice house for $154,900 that we probably could've got for less but instead we offered full asking price and $4k toward closing/prepaids. They accepted the offer 3 hours later.
So yeah, it's a numbers game, add money to one side then subtract it from the other... it all balances out in the end.