Posted on: 06th Dec, 2009 03:14 pm
Hi there,
I am looking at buying a new home with my partner. This will be my first time buying a home and my partner's third.
We're looking at getting into an FHA loan with a 3.5% down payment. Our lender sent us an estimated Good Faith Estimate using some sample numbers and the amount we'd have to bring to closing is much more than either one of us are willing to part with at this point, since we just had to pay a substantial amount of money out on the house we just sold.
When I mentioned that to our lender, he mentioned that we could probably get seller's concessions to help out with the additional costs, such as escrow, etc.
I've done some research on how seller's concessions work and I must say that if I'm understanding them correctly, the term is really misleading. It's a Sunday and I won't be speaking with my lender until tomorrow, so, I'm hoping to get a little insight tonight, if possible. :)
When I first heard the term seller's concessions, I was under the impression of the following (just using an example with round numbers to make it easier):
Purchase Price of 175,000.
Seller's concessions of 5,000.
Loan Amount of Purchase Price - Down Payment. (168,875).
$ buyer brings to closing NOT including down payment before seller's concessions - 6,875.
$ buyer brings to closing NOT including down payment and AFTER counting seller's concessions = 1,875.
Total Loan Amount: 168,875
Total Amount Buyer Brings to Closing, including Down Payment after Seller's Concessions: 8,000.
(Hope that made sense!)
Now, from what I am reading on various places throughout the internet, is that this is in fact, not the case. If I'm correctly understanding what I'm reading, this would the case (again using round sample numbers)
Hi there,
I am looking at buying a new home with my partner. This will be my first time buying a home and my partner's third.
We're looking at getting into an FHA loan with a 3.5% down payment. Our lender sent us an estimated Good Faith Estimate using some sample numbers and the amount we'd have to bring to closing is much more than either one of us are willing to part with at this point, since we just had to pay a substantial amount of money out on the house we just sold.
When I mentioned that to our lender, he mentioned that we could probably get seller's concessions to help out with the additional costs, such as escrow, etc.
I've done some research on how seller's concessions work and I must say that if I'm understanding them correctly, the term is really misleading. It's a Sunday and I won't be speaking with my lender until tomorrow, so, I'm hoping to get a little insight tonight, if possible. :)
When I first heard the term seller's concessions, I was under the impression of the following (just using an example with round numbers to make it easier):
Purchase Price of 175,000.
Seller's concessions of 5,000.
Loan Amount = 180,000 - 6,300 Down Payment (3.5% of Purchase Price + Seller's Concessions) = 173,700
$ buyer brings to closing NOT including down payment before seller's concessions - Roughly 7,200
$ buyer brings to closing NOT including down payment and AFTER counting seller's concessions = 2,200
Total Loan Amount: 173,700
Total Amount Buyer Brings to Closing, including Down Payment after Seller's Concessions: 8,500
(Now I'm hoping that I remembered all the numbers I used for this last scenario were the same throughout!)
In any case, this seems a little bit odd. My partner has had the buyer pay X amount on closing costs before on a home purchase and it was not rolled up into the loan. The whole thing really doesn't make sense.
The only way I can kind of make sense of this is if I try to think of it as this way: The seller is taking $5,000 less on the house and the buyer is taking on $5,000 more in their mortgage. The bank is the one benefiting.
My lender told me that 100% financing is pretty much non-existent these days. I'm not sure if there are any other loan options out there that will have me bringing less than 8% of the house purchase price (including closing costs and down payment) to the table.
I have a middle credit score and my partner's is very high.
Unfortunately we've found a house that we really want, but since we just paid out so much from the sale of our last house, we really don't want to deplete our financial safety net.
I apologize if this post was really long. :)
Thanks!
I am looking at buying a new home with my partner. This will be my first time buying a home and my partner's third.
We're looking at getting into an FHA loan with a 3.5% down payment. Our lender sent us an estimated Good Faith Estimate using some sample numbers and the amount we'd have to bring to closing is much more than either one of us are willing to part with at this point, since we just had to pay a substantial amount of money out on the house we just sold.
When I mentioned that to our lender, he mentioned that we could probably get seller's concessions to help out with the additional costs, such as escrow, etc.
I've done some research on how seller's concessions work and I must say that if I'm understanding them correctly, the term is really misleading. It's a Sunday and I won't be speaking with my lender until tomorrow, so, I'm hoping to get a little insight tonight, if possible. :)
When I first heard the term seller's concessions, I was under the impression of the following (just using an example with round numbers to make it easier):
Purchase Price of 175,000.
Seller's concessions of 5,000.
Loan Amount of Purchase Price - Down Payment. (168,875).
$ buyer brings to closing NOT including down payment before seller's concessions - 6,875.
$ buyer brings to closing NOT including down payment and AFTER counting seller's concessions = 1,875.
Total Loan Amount: 168,875
Total Amount Buyer Brings to Closing, including Down Payment after Seller's Concessions: 8,000.
(Hope that made sense!)
Now, from what I am reading on various places throughout the internet, is that this is in fact, not the case. If I'm correctly understanding what I'm reading, this would the case (again using round sample numbers)
Hi there,
I am looking at buying a new home with my partner. This will be my first time buying a home and my partner's third.
We're looking at getting into an FHA loan with a 3.5% down payment. Our lender sent us an estimated Good Faith Estimate using some sample numbers and the amount we'd have to bring to closing is much more than either one of us are willing to part with at this point, since we just had to pay a substantial amount of money out on the house we just sold.
When I mentioned that to our lender, he mentioned that we could probably get seller's concessions to help out with the additional costs, such as escrow, etc.
I've done some research on how seller's concessions work and I must say that if I'm understanding them correctly, the term is really misleading. It's a Sunday and I won't be speaking with my lender until tomorrow, so, I'm hoping to get a little insight tonight, if possible. :)
When I first heard the term seller's concessions, I was under the impression of the following (just using an example with round numbers to make it easier):
Purchase Price of 175,000.
Seller's concessions of 5,000.
Loan Amount = 180,000 - 6,300 Down Payment (3.5% of Purchase Price + Seller's Concessions) = 173,700
$ buyer brings to closing NOT including down payment before seller's concessions - Roughly 7,200
$ buyer brings to closing NOT including down payment and AFTER counting seller's concessions = 2,200
Total Loan Amount: 173,700
Total Amount Buyer Brings to Closing, including Down Payment after Seller's Concessions: 8,500
(Now I'm hoping that I remembered all the numbers I used for this last scenario were the same throughout!)
In any case, this seems a little bit odd. My partner has had the buyer pay X amount on closing costs before on a home purchase and it was not rolled up into the loan. The whole thing really doesn't make sense.
The only way I can kind of make sense of this is if I try to think of it as this way: The seller is taking $5,000 less on the house and the buyer is taking on $5,000 more in their mortgage. The bank is the one benefiting.
My lender told me that 100% financing is pretty much non-existent these days. I'm not sure if there are any other loan options out there that will have me bringing less than 8% of the house purchase price (including closing costs and down payment) to the table.
I have a middle credit score and my partner's is very high.
Unfortunately we've found a house that we really want, but since we just paid out so much from the sale of our last house, we really don't want to deplete our financial safety net.
I apologize if this post was really long. :)
Thanks!
here's another scenario that might help you to make sense of it all:
purchase price is $175000; seller pays $5000 towards your costs. your down payment is 3.5% ($6125). if your overall closing costs are, say, $5000, then you'd have to ordinarily bring $11125 to closing. in this case, however, you'd only have to bring $6125 - down payment, as the seller will be able to cover all costs for you.
now, i see you mention a figure of $180K up there, too. is the proposal for the purchase price to be increased to that amount so as to accommodate the seller concession? this is not at all uncommon. if so, then your down payment is slightly higher, of course, but you'd still get the benefit of the seller paying costs for you. you might come out of pocket for something - relatively minimal in the overall scheme of things.
the bank isn't making out in this scenario, but the seller is being "made whole" so to speak: $175000 without concession is equivalent to $180000 with $5000 concession, give or take a few dollars.
is this helpful? i hope so. if you like this home and you want to buy it then this is a solution that allows you to get in with the minimal investment and not have to scrape for extra dollars. therefore, you win also.
purchase price is $175000; seller pays $5000 towards your costs. your down payment is 3.5% ($6125). if your overall closing costs are, say, $5000, then you'd have to ordinarily bring $11125 to closing. in this case, however, you'd only have to bring $6125 - down payment, as the seller will be able to cover all costs for you.
now, i see you mention a figure of $180K up there, too. is the proposal for the purchase price to be increased to that amount so as to accommodate the seller concession? this is not at all uncommon. if so, then your down payment is slightly higher, of course, but you'd still get the benefit of the seller paying costs for you. you might come out of pocket for something - relatively minimal in the overall scheme of things.
the bank isn't making out in this scenario, but the seller is being "made whole" so to speak: $175000 without concession is equivalent to $180000 with $5000 concession, give or take a few dollars.
is this helpful? i hope so. if you like this home and you want to buy it then this is a solution that allows you to get in with the minimal investment and not have to scrape for extra dollars. therefore, you win also.
Thank you so much! That makes more sense.
No, so far we haven't put an offer in. We're waiting for our realtor to pull the comps. The house asking price is right around 180 and they say they're really motivated and to "bring your offer".
If we hadn't put out so much money for selling the last house, we'd be much more comfortable with the amount at closing. It's just that in today's economic climate, neither one of us feels comfortable depleting the savings accounts. :) I think that's smart! :)
Thank you so much for your reply. I was reading tons of stuff on the internet, because I want to educate myself as much as possible. Even though my partner's bought homes before, I have not, and I want to know as much about the way it all works as possible. Unfortunately, a lot of the information out there is not 100% accurate and it's hard to glean the answers to a specific situation.
Again, I really appreciate your reply. It helps ease my mind quite a bit!
No, so far we haven't put an offer in. We're waiting for our realtor to pull the comps. The house asking price is right around 180 and they say they're really motivated and to "bring your offer".
If we hadn't put out so much money for selling the last house, we'd be much more comfortable with the amount at closing. It's just that in today's economic climate, neither one of us feels comfortable depleting the savings accounts. :) I think that's smart! :)
Thank you so much for your reply. I was reading tons of stuff on the internet, because I want to educate myself as much as possible. Even though my partner's bought homes before, I have not, and I want to know as much about the way it all works as possible. Unfortunately, a lot of the information out there is not 100% accurate and it's hard to glean the answers to a specific situation.
Again, I really appreciate your reply. It helps ease my mind quite a bit!
i'm glad to be of assistance. continue to ask if you need to do so - that's what we're here for, after all.
I am looking at house that cost 245k, I have 13,000k cash, the sellers concession is 8,000k I will put 3.5% down. How will this affect my total cost at closing. does this means that the amount of my mortgage will be more. Is this 8,000k be a part of my mortgage?
john, your 3.5% down payment equals $8575. that will leave you with $4425.
if your closing costs are $8000, the seller will be paying every penny; that means you'll still have your $4425 when you walk away from the closing. if your costs are anything higher than $8000, you'd have to pay that excess amount (i.e. $8200 - you pay $200).
your loan amount will be $236425, and will not be affected in any way by the seller concession.
if your closing costs are $8000, the seller will be paying every penny; that means you'll still have your $4425 when you walk away from the closing. if your costs are anything higher than $8000, you'd have to pay that excess amount (i.e. $8200 - you pay $200).
your loan amount will be $236425, and will not be affected in any way by the seller concession.