Purchasing first home. Confused. Help?

tribejammer05

Hello, Jammers. So my wife and I are looking to purchase our first home and just made an offer. Now what is really confusing are all of the closing costs.

Our loan officer gave us a break down based up some estimates. We have the money saved for a down payment, but we're not sure about the closing costs.

My question: Are closing costs a part of the down payment or do we need to pay more on top?

For example (these are not my actual figures): I'm putting $15,000 down on the home. Closing costs come to be about $5,000. Would I have to pay $20,000 (15,000 down + 5,000 closing)? Or would everything be rolled into one and my down payment would then just be $10,000 (15,000 - 5,000)?

The sticking point in our offer is the closing costs. We're asking seller to pay this much;they're willing to pay that much. Any help would be great.

Nami

your total cost would be 20k

15k would go to value of house... not lawyer fees, taxes, and such.

If you put into your offer the seller covers the closing costs and they accepted then you dont have to worry..i think.

im no expert so check into it more.

Sidnum

Yeah closing is a separate cost. But, if you can work it right, you could get the sellers to agree to pay for it.

Monster Rain

tribejammer05 wrote:

Hello, Jammers. So my wife and I are looking to purchase our first home and just made an offer. Now what is really confusing are all of the closing costs.

Our loan officer gave us a break down based up some estimates. We have the money saved for a down payment, but we're not sure about the closing costs.

My question: Are closing costs a part of the down payment or do we need to pay more on top?

For example (these are not my actual figures): I'm putting $15,000 down on the home. Closing costs come to be about $5,000. Would I have to pay $20,000 (15,000 down + 5,000 closing)? Or would everything be rolled into one and my down payment would then just be $10,000 (15,000 - 5,000)?

The sticking point in our offer is the closing costs. We're asking seller to pay this much;they're willing to pay that much. Any help would be great.

Closing costs are paid on top of your down payment, so don't put down so much that you can't afford the closing costs if the seller isn't going to cover them. When the bank is calculating what your mortgage payments will be, they are assuming that whatever you refer to as the down payment will be applied to the sale of the home and they will also use that to factor in the closing costs (some costs may be based on the amount of the mortgage while other costs are fixed no matter how big or small the mortgage is). Hopefully your realtor understands what you are trying to accomplish in that respect. If you're not sure, you should speak to your agent before you accept the seller's counteroffer or make a counteroffer of your own because you may wind up losing money if you enter into a contract on the house and are unable to close due to the closing costs being too high.

If the closing costs are the only sitcking point and the home has already been appraised for more than your offer, you may want to see if the owner is willing to accept a slightly higher price in exchange for kicking that extra money towards the closing costs. So if your initial offer was $200,000 with the seller paying $5,000 towards closing costs and they're only willing to pay $3,000 you could offer them $202,000 with $5,000 towards closing costs since they're going to end up with the same amount of money in the end. The only downside is that it will slightly increase your monthly mortgage payments, but you'll have that extra $2,000 in your pocket if you need to buy any furniture, appliances, etc. You also need to be sure that you're going to be able to get the mortgage for that higher amount if you go that route because it's your responsibility if the deal falls through and you could wind up losing whatever you put in escrow.

something else to consider, if you are getting $5,000 from the seller towards closing costs and the closing costs wind up being less than $5,000 the seller keeps the extra money so if you have anything that estimates the closing costs (since you'll never know with 100% certainty what they will be until just before you close), don't ask for much more than that estimate. You'd be better off asking for something very close to that estimate and lowering your offer so the seller's profit is still the same. So if the closing costs are only around $3,900 you might offer $199,000 with the seller giving $4,000 towards closing costs. It won't make a huge difference in your monthly payments, but it's still better to have that extra money in your pocket instead of paying interest on it and letting the seller keep the extra funds.

81

it's a fuckin scam by the banks. :fp: i'll never understand why a mortgage is so more complex when compared to an auto loan. :fp:

but yeah, they are seperate....often times, they will roll it into the loan principal.

DS1119

81 wrote:

it's a fuckin scam by the banks. :fp: i'll never understand why a mortgage is so more complex when compared to an auto loan. :fp:

but yeah, they are seperate....often times, they will roll it into the loan principal.

Banks wouldn't make nearly as much money if they set up a mortgage like an auto loan and if auto loans were set up like mortgages the auto industry would be crushed.

chicagobasba

Also, If taxes are paid in arrears make sure you get a credit from the seller on your settlement statement (hud-1) on page 1 for them. The hud-1 will break down all your closing costs.

Johnny Aggro

Delighted for u buying ur house. I got burnt by negative equity... House worth 30% of what i paid. If i had it again id love 99 yr lease

best of luck to u though

81

DS1119 wrote:

81 wrote:

it's a fuckin scam by the banks. :fp: i'll never understand why a mortgage is so more complex when compared to an auto loan. :fp:

but yeah, they are seperate....often times, they will roll it into the loan principal.

Banks wouldn't make nearly as much money if they set up a mortgage like an auto loan and if auto loans were set up like mortgages the auto industry would be crushed.

of course they wouldn't make as much, but all the bull shit that goes into a mortage is such a joke. points, fee's fee's fee's more fee's fuck me.

banks get worse when you get into corporate borrowing. :fp:

DS1119

81 wrote:

of course they wouldn't make as much, but all the bull shit that goes into a mortage is such a joke. points, fee's fee's fee's more fee's fuck me.

banks get worse when you get into corporate borrowing. :fp:

I remember looking at the payment schedule when I signed my first mortgage and thinking to myself...wait a minute only 18 dollars of my first payment is going towards principle and the rest is interest? :fp:

he.who.forgets

DS1119 wrote:

81 wrote:

of course they wouldn't make as much, but all the bull shit that goes into a mortage is such a joke. points, fee's fee's fee's more fee's fuck me.

banks get worse when you get into corporate borrowing. :fp:

I remember looking at the payment schedule when I signed my first mortgage and thinking to myself...wait a minute only 18 dollars of my first payment is going towards principle and the rest is interest? :fp:

no shit, it's ridiculous

tribejammer05

See...my loan officer said that closing costs and the down payment are all rolled into one. But on the worksheets he provided to me I just don't see it. Plus on top of that I'm not sure what questions I'm trying to ask and his answers are a bit confusing.

We're going back and forth on an offer and we've asked the seller to cover X amount of closing costs, but they won't budge on the closing costs and we just don't have extra money other than the down payment to put towards the offer. The seller has an advantage that the house hasn't been on the market for long so we may end up walking away and testing the waters else where. Thanks everyone for your input.

81

tribejammer05 wrote:

See...my loan officer said that closing costs and the down payment are all rolled into one. But on the worksheets he provided to me I just don't see it. Plus on top of that I'm not sure what questions I'm trying to ask and his answers are a bit confusing.

We're going back and forth on an offer and we've asked the seller to cover X amount of closing costs, but they won't budge on the closing costs and we just don't have extra money other than the down payment to put towards the offer. The seller has an advantage that the house hasn't been on the market for long so we may end up walking away and testing the waters else where. Thanks everyone for your input.

good faith estimate i believe is what you are looking at....or something like a funds flow.

it should list all the fee's seperate....

my guess is they are deduction your closing costs from your downpayment resulting in a higher principal balance.


simple forumla is purchase price, plus loan orgination fee's, loan insurance (anouther scam), lawyer fee's, title fee's, tax, and other fee's that you haven't paid, less down payment = princiapl. it's not as simple as purchase price less down payment = principal. property taxes factor in the cash flow as well.

DS1119

tribejammer05 wrote:

See...my loan officer said that closing costs and the down payment are all rolled into one. But on the worksheets he provided to me I just don't see it. Plus on top of that I'm not sure what questions I'm trying to ask and his answers are a bit confusing.

We're going back and forth on an offer and we've asked the seller to cover X amount of closing costs, but they won't budge on the closing costs and we just don't have extra money other than the down payment to put towards the offer. The seller has an advantage that the house hasn't been on the market for long so we may end up walking away and testing the waters else where. Thanks everyone for your input.

My experience is if the house is something you and your wife has decided is right for you don't let a few dollars keep you from making the deal. I'm not saying just concede but try some different negotiating tactics to get some extras that will save you some money. Things like the kitchen appliances and the washer and dryer. Aske that those be left with the house.

I don't know the specifics of your transaction but I've been negotiating deals for a while now in what I do for work. Always keep in mind, you want to buy the house and the seller wants to sell it. Just keep hammering and chipping away.

EdsonNascimento

tribejammer05 wrote:

See...my loan officer said that closing costs and the down payment are all rolled into one. But on the worksheets he provided to me I just don't see it. Plus on top of that I'm not sure what questions I'm trying to ask and his answers are a bit confusing.

We're going back and forth on an offer and we've asked the seller to cover X amount of closing costs, but they won't budge on the closing costs and we just don't have extra money other than the down payment to put towards the offer. The seller has an advantage that the house hasn't been on the market for long so we may end up walking away and testing the waters else where. Thanks everyone for your input.

DO NOT offer to pay more to the seller and whatever that confusing post above said. You could wind up actually paying them more than you intend (as the same poster points out at the end).

Try to get them to kick some in. But if you got a good deal on the house, this is probably a bad idea as it may piss them off.

As 81 said, you can simply roll it into your mortgage, and that is probably what your broker is saying. It's not as simple as down payment and fees are rolled into one, so make him explain it. But, in the end, that is what it amounts to.

And to those saying it should be just like a car loan - well, you generally don't need to go deed checking and back mortgage checking and the like that protects the BUYER. So, it's a good thing they are explicit and all the fees should be detailed for you. There are title searches and the like that make sure the seller (or prior owners) don't owe money that is liened against the house that you would wind up owing if not protected by said search. That's part of what you are paying for. Then, you pay insurance to protect you if the searches weree erroneous and someone comes back years later after your house that has nothing to do with you. The points a bank charges are EXPLICITLY their charge to process the loan. Better to be up front than hide it in an interest rate which you will be paying for the life of your loan.

This is also why you should shop your mortgage. Different lenders offer different rates, fees, etc. But, some of the basic costs like title searches, etc. are yours no matter where you go.

But, for purposes of determining your % of mortgage down payment which effects your rate, points, etc, your closing fees will not count. EXCEPT - if you roll it into your mortgage. In which case, your mortgage principal goes up, but so does your effective down payment % (assuming you pay the equivalent).

Confused? Good. Because it is. Have your agent explain it all great detail and not cop out and say - it's all rolled into one!!! A good agent will do this. Good luck and congratulations!!! The next 6 months will be the most stressful of your life.

81

EdsonNascimento wrote:

And to those saying it should be just like a car loan - well, you generally don't need to go deed checking and back mortgage checking and the like that protects the BUYER. So, it's a good thing they are explicit and all the fees should be detailed for you. There are title searches and the like that make sure the seller (or prior owners) don't owe money that is liened against the house that you would wind up owing if not protected by said search. That's part of what you are paying for. Then, you pay insurance to protect you if the searches weree erroneous and someone comes back years later after your house that has nothing to do with you. The points a bank charges are EXPLICITLY their charge to process the loan. Better to be up front than hide it in an interest rate which you will be paying for the life of your loan.

my point was, especially as it relates to a refi, is that i shouldn't have to pay thousands in fee's for the bank to loan me money. yes, i understand title search, but i believe that was a seperate fee.

rollings

Your negotiated down payment is your down payment period...

Are the "worksheets" that you mentioned actual draft copies of page 1 of 2 of your "HUD statement" (Hud would be written in small letters somewhere on the top or bottom of the form)

Everything is usually rolled all together on that form so you will NOT have to come up with an extra $5,000.

On the HUD statements, you will see that both pages each have two columns--one for seller and one for buyer. You will see that the totals on page two (the "closing costs") will transfer over to one line item on page one. You will see that the very last line on page one shows, in each respective column, amounts due to/from seller, and amount due to/from buyer.

If you don't owe any money and "amount due from buyer" shows zero (last line on page one), then apparently your mortgage is absorbing the amount of the closing costs. (If however, your bottom line shows that the buyer owes $5,000 or whatever, then your mortgage has not absorbed the closing costs and you do owe it. But apparently your agent is saying otherwise.)

But, its true, your agent should walk you line by line and explain how this works. If you don't get it, just ask him to explain again until you do.

Hope this helped a little!

jethrojam420

If it is a hud home they generally will not negotiate with closing costs, thereby making them all your problem. they are not included in the down payment, and you will have to come up with that money prior to closing. on top of all of these closing costs, there are inspection costs that you must pay, appraisal fees which are immediate, underwriters fees sometimes, and one year of your homeowners insurance must be paid prior to close as well. I am about 3 weeks away from closing on my first house as well so i feel your pain. my seller is taking care of all closing costs, which are then being put into the mortgage but in the end i am still paying. closing costs run upwards of 5k and the other bs i just mentioned is an easy 2k so keep that in mind when deciding on a down payment. Side note: since you are a first time buyer i highly suggest looking into a USDA loan. minimal to even no down payment, and one of the best interest rates around with no PMI. good luck

amethgr8

let me agree with the posts that state your agent an or loan officer should explain this to you until you understand and feel comfortable moving forward. I'm not giving legal advise.

depends on alot of things I didn't see given in the original equation. In our area a draft of the HUD-1 closing statement is not required, just a good faith estimate.

typically the good faith estimate runs ALOT higher these days,than actual costs due to revision of disclosure laws from all the bank fraud. if those fees and costs go down, it's okay, but if they go up then everyone has to go over the figures, resubmit them with a 3 day notice. closing is rescheduled, maybe buyers loose their lock or pay extra, and the like. so lenders make sure the buyers figures are on the high side.

depends on if you're getting a conventional loan or an FHA loan. FHA has a "closing cost" (it's either a funding fee or upfront MIP mortgage insurance premium 1.5% of loan or 1.75%) that changes the amount of the loan. here's my example:

$100,000 purchase price, FHA loan 3.5% down payment.
buyer should need $3500 as their downpayment and thus the loan amount would be $96,500 right?
buyer thinks they'll need $3500 cash in the bank for the DP plus any closing costs (usually run 3-5% of the price); let's say the buyer asks for a flat fee of $2000 from the seller towards their closing costs.
1.5% (funding fee) x 96500=1447.50 (this is added to your loan amount.

purchase price $100,000
amount of new loan $97,947

difference need is $2053 and not $3500

amethgr8

purchase price $100,000
charges to buyer 2,500

total due from buyer $102,500

amount paid on behalf of buyer
amount of new loan $97,947
earnest money 1,000
seller c/c credit 2,000
prorated RE taxes 500

total paid on behalf of buyer $101,447
from $102,500

total amount due from buyer in this (albiet very basic senerio) is $1053. I'm sure the loan officer on the deal would have told the buyer they would need $3500 min plus closing costs to purchase the house.

in our area HUD foreclosed home (and most forclsoed home) will allow up to 5%of the price towards buyers closing costs, just keep in mind it comes right off the top and REO's and HUD's look at their bottom line only. sometimes the price is increased to allow closing costs to be paid to the buyer.

hope this helps, let me know if I can help further.

amy

Get_Right

Yeah my closing costs caught me off guard. Almost 17K. Fucking titles and Westchester county!

MayDay10

I just purchased my first house in the fall. Its a tough process. Once your offer is accepted, the fun just begins. You gotta get approved by the bank, provide them a book of information, get really approved by the bank, get the house inspected, appraised, find insurance, get your closing date, and then signing day.


Its all worth it when you get the keys though and you drive up to your house for the first time.

Good luck

hedonist

I'm not sure if the law is the same in OH as in CA (may want to check it out), but there's a 72-hour period of time during which you can "change your mind" after the commitment - after having signed the documents.

And to echo the others, congratulations! It's scary at first but if done right, also a fuckin blast.

LikeAnOcean

From what I understand, that all gets factored into your loan... I'll tell ya soon, I'm in the same spot.