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Closing Cost Credits and How to save $Thousands at the closing table when buying a 馃彔 home - YouTube
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- Closing cost credits
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and how to save yourself
thousands at the closing table.
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Hi, I'm Jeff Chubb,
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and I wanted to share with you
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everything about closing cost credits
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and how you can use them
when purchasing a home
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to ultimately help save
you thousands of dollars
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of extra expense at the closing table.
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So first off, what is
a closing cost credit?
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Well, a closing cost credit is essentially
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where the seller gives the buyer money
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to help pay towards their closing costs.
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Now, remember that this money
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that the seller is giving
this buyer can't go
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towards their down payment,
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but it can pay their closing costs.
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So, why does a buyer use them?
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Ultimately, a closing cost
credit will save a buyer
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from coming to the table
with additional funds, right?
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Because the seller's gonna
be giving those funds
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in order to pay for those closing costs.
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So they're able to get into
the house for less money.
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But keep in mind essentially what it is,
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is a closing cost credit is really a buyer
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financing those closing costs.
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Because ultimately, at the end of the day,
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everything comes down
to the net for a seller.
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So, when should you talk to
your agent about closing costs?
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Well, you should really be talking
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to your agent about,
ya know, closing costs
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and whether you wanna do
them at your initial meeting
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when you're talking about
your real estate goals
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and ultimately what you're
looking for in a home
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and talking about your budget.
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But you also wanna talk to
your real estate agent again
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at the time of writing up the offer
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because it's gonna depend
a lot about what type
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of situation you're going into.
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For example, if you're going
in a multiple offer situation,
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you probably don't want
a closing cost credit.
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So, that might be a situation
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where we don't necessarily write it in
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as your initial offer.
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Which I'll talk about in a couple seconds,
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how we can try to get those
closing cost credits in
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at a later point in the transaction.
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But generally speaking,
somebody who's putting 20% down
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doesn't really need a closing cost credit.
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However, I have seen situations
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where the buyers have exactly 20% down
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and they don't wanna
go to 19%, if you will,
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'cause they have that exact 20%.
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So they're able to get
more favorable financing
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and they might need some
help with some closing costs.
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So it doesn't matter really
if you're putting 3% down,
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5% down, or 20% down,
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closing cost credits
is definitely something
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that is quite frankly
very available to you.
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So how to confirm the amount
of the closing cost credits?
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Generally speaking, you can estimate
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about 1 1/2 to 2% of the purchase price
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is what it's going to cost
you for closing cost credits.
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So what does closing cost consist of?
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Well it's the application
fee, origination fee,
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processing fee, underwriting
fee, appraisal fees,
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lots of fees when you
work with banks, right?
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You have your title insurance,
you have recording fees,
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those are fees that go to the state.
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You're gonna need some
homeowner's insurance,
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and you have to pay that ahead of time.
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And then maybe any condo
fee or tax adjustment.
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So those are all closing costs
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that you have to take care of
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at the time of closing,
at the closing table.
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So, to know the exact amount,
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you really wanna reach out to your lender
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right before you write that offer,
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in order to start really talking about
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going from hypotheticals
to more exact amounts.
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So, what happens if you
ask for a larger credit
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than you ultimately end up using?
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So let's say for example you ask for $5000
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but you only end up using
$4500 for closing costs.
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Well, believe it or not,
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that $500 actually
reverts back to the seller
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because remember, none of this money
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can go towards your down payment.
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So you do want to try to
be as exact as possible
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when it comes to closing costs.
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So, couple reasons why
a seller might say no
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to closing costs.
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The first one's appraisal issues.
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So let's just say your house was, ya know,
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$100,000 but essentially
we're at $103,000, right?
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Well now that house needs to
appraise for that $103,000
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in order for the deal to go through.
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So there is a little more risk there
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from the seller's perspective
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and depending on the situation and deal,
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we can actually help, ya know,
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minimize that risk to make a seller
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feel more comfortable with that
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by putting certain language in there.
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Also, it's gonna cost the seller
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a couple extra bucks in
additional taxes and fees
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so their net proceeds
amount will change a little,
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not a whole lot, but by a little
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and this could ultimately
negatively impact them
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about the thoughts of
the closing cost credit.
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Something that sellers do think,
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which necessarily isn't true,
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they believe there's this
misconception, if you will,
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that if somebody is
asking for closing costs,
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then it means, well
they're a weaker buyer.
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And that is not true.
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It just means for this specific case,
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they might need a little extra help
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or they might just wanna
finance their closing costs,
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quite frankly because they
want to keep their money
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in the stock market, I don't know.
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So, but let's just say
your offer is accepted.
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We've gone through the purchase,
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excuse me, the home inspection,
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now we're on the purchase
and sale agreement.
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And you decide hey, you know what,
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I want the seller to try to
contribute some closing costs.
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Well, we can actually
go back to the seller
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and we can ask very nicely,
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'cause they don't have to say yes,
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but we can ask very nicely just
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"You know Mr. Seller, you know,
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"I know we had agreed to $100,000
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"but can we inflate that price to $103,000
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"and can you just give me $3000 back
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"in closing cost credit?"
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Now again, the seller's numbers change
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about $13 or $14 of additional
taxes off of that example.
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So we're not talking a whole
much, a whole lot here,
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but their net does change a little.
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So, you do wanna ask
very, very, very nicely
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when you do this.
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But that terminology is called
inflating the sales price
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of the home in order to get
that closing cost credit back.
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So again, my name is Jeff Chubb,
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I work with the Chubb Realty Group.
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We're brokered by EXP Realty.
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If you have any questions about your home,
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or your dream home that
you're looking to purchase,
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or a home that you're looking to sell,
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or the market you're currently living in.
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Hey, no question's out of bounds here.
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We'd love to chat with ya.
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No real estate question's out of bounds.
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We'd love to chat with ya.
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The best number to get us at
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is 617-480-2600 or by
email at [email protected].
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Thanks for watching.
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We look forward to being
your real estate resource
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and hope you're having a great day.
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