Closing Cost… Spend It Or Loose It!
If you have a contract with a seller for $400,000 with $10,000 coming back to you as a closing cost credit, you don’t want to find out at settlement that you are going to have to forfeit $1,200 of that.
It is a common practice to request a closing cost credit from a seller when purchasing a home. However, buyers should be cautious in how much they request. If they receive too much, they could be forfeiting money back to the seller!
There are limits on what a closing cost credit can be used for. Each state has different restrictions on what this can be used for. Lenders also restrict how much a seller can give. The current average is around 3% of the sales price. What is important to remember is that your lender has to approve what the credit goes towards. Therefore, if you want to use the additional $1,200 and buy a new washer and dryer… don’t go renting a U Haul too quickly until your lender signs off on it. In fact, the seller may even have to agree to it!
3 Quick Tips…
- Ask your lender prior to writing the contract how much closing cost you safely need to settle.
- If you are using VA or Conventional Financing… you can currently receive back at the table the amount you gave as an earnest money deposit. You cannot do this with FHA financing.
- If you have money left over to spend… try pre-paying HOA fees or adding and a home warranty. These are usually safe items in your lenders eyes.
Read…
What Is An Earnest Money Deposit?
flickr- joshua davis
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