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Here is my situation, I am on a contract to buy a house for $300,000 and the seller (bank owned) has accepted to offer $9000 (3%) in seller subsidy. In the meantime, I found a lender who is willing to do a no closing cost loan. My loan is for $240,000 as I put 20% down (ie., $60,000). Could you please advice me on how wisely use this seller subsidy?
Should I re-negotiate the price with the seller ? (reduce the price to $291,000) or is there any other way to use this $9000? Please help.
Additional Details
My interest rates are the same with or without fees. My loan details: 15 yr fixed rate mortgage and even If I buy points (max:1.25) to lower the rate, still I end up with a closing cost of ~$6000 meaning $3000 remains unused.
Last edited by andy_milr; 02-16-2011 at 11:48 AM..
Reason: additional details
You need to check to see how the contract was worded. In theory, if it says that you get up to $9000 toward closing costs, you could be out of luck. That's not to say that you can't try to get it as a straight forward credit but I have a feeling that they won't automatically have to give it to you. In practice, it seems like no one ever pays attention to this stuff and it just goes on as a straight credit anyway! Once you've signed the contract, though, you are done unless there's something in the contract allowing you to renegotiate. Disclaimer: I'm not an attorney and forum advice is not a substitute for seeking legal advice from an attorney.
Here is my situation, I am on a contract to buy a house for $300,000 and the seller (bank owned) has accepted to offer $9000 (3%) in seller subsidy. In the meantime, I found a lender who is willing to do a no closing cost loan. My loan is for $240,000 as I put 20% down (ie., $60,000). Could you please advice me on how wisely use this seller subsidy?
Should I re-negotiate the price with the seller ? (reduce the price to $291,000) or is there any other way to use this $9000? Please help.
You could use it to 'buy the rate down'. Or, if you want to escrow, a combination of buying the rate down and covering the escrow impounds and first year of homeonwer's insurance.
Here is my situation, I am on a contract to buy a house for $300,000 and the seller (bank owned) has accepted to offer $9000 (3%) in seller subsidy. In the meantime, I found a lender who is willing to do a no closing cost loan. My loan is for $240,000 as I put 20% down (ie., $60,000). Could you please advice me on how wisely use this seller subsidy?
Should I re-negotiate the price with the seller ? (reduce the price to $291,000) or is there any other way to use this $9000? Please help.
You are aware that with a no cost loan you are taking a higher interest rate? On a no cost loan, it is not that there are no closing costs. The same closing costs will be there. What the lender does is they give you a higher interest rate and they pay the closing costs for you.
At the higher interest rate, when the lender sells your loan into the secondary market, they get paid on the back side. The end investor will make more interest off of you and they are willing to pay the lender.
Either way, the consumer always pays the closing costs. They either pay the closing costs or they take a higher interest rate and pay more interest over the life of the loan.
if you are keeping this home for less than 3 years, a no cost loan is a great option. If you are keeping this home for a longer time, you should pay the closing cost and get the lower interest rate.
If your rate is the same whether you pay or the bank pays, i would suggest you contact another lender. The rate with no costs will be higher.
I'm purchasing a bank approved short sale for 250,00.00. Bank didn't approve 3% towards closing so to get closing it was added to the list price of house. Will I benefit at the end?
I'm purchasing a bank approved short sale for 250,00.00. Bank didn't approve 3% towards closing so to get closing it was added to the list price of house. Will I benefit at the end?
Benefit is a relative term here. It's added to the price, therefore depending on your down payment, a good portion of it is rolled into the loan. If it helps optimize your cashflow so as to facilitate the deal, then yes. But it's not like they are paying anything out of pocket, you are still paying it, you are just paying MORE for it because you are paying interest over time for it.
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