Financing closing costs on your Ohio mortgage
On purchase loans you can’t literally finance closing costs. But you can make an offer to purchase a home with the seller paying them. It’s pretty much the same thing. FHA loans allow seller contributions up to 6% of your purchase price. Conventional loans allow anywhere from 2% to 6% seller concessions (depending upon down payment and property type) to pay towards a buyers closing costs, pre-paid taxes and insurance escrows, and other settlement charges. For FHA purchase of $70 or more, a 6% seller concession should allow you to come to close with only the mandatory 3.5% down payment.
Heres how it works
For example if you are about to place a bid on a house valued at $100,000 as the list price. You might be thinking about making an offer for the property in the amount of $94,000 since it is common practice to offer under the list price. But instead of placing that lower bid you might what to accept the list price as is on condition the seller pay $6,000 of the value toward your closing costs, your 1% upfront PMI can be paid with the concession as well.
In the case the seller will not accept any amount below $100,000 and you have very good reason to believe the property is valued at $106,000 or more you may be able to add that 6% to the top of the loan giving you a loan in the amount of $106,000 but keep in mind the sales price must now be increase to $106,000 and now include a seller concession of $6,000 and the end result is the same for the seller and you have saved $6,000 out of pocket.
Financing closing costs on a refinance
On refinances, closing costs can be rolled into the new mortgage, provided they fit within the maximum loan amount you qualify for under the terms you have chosen. If you have very little equity a no closing cost loan may be the best option to take advantage of low interest rates.
The bottom line
On purchases, ask for a seller concession, if you want to come to close with less money out of pocket. On refinances, it may be necessary to obtain the appraisal before knowing for certain costs can be rolled in.
If you have any further questions about financing the closing costs on a purchase or refinance loan please do not hesitate to ask me.
