One of the most common questions I’m asked with my buyers through the home buying process is how do closing costs work and can they ask for money from the seller for closing costs? Every real estate transaction is completely unique so there is no real hard or fast rule of when you can or should ask for money towards your closing costs but there are definitely some good guidelines to follow.
First of all, what are closing costs? Closing costs are additional expenses you come across through the home buying process outside of your down payment. It includes fees from your lender to get the loan as well as title insurance and other title related fees. If you’re wondering how much closing costs typically come out to, a good rough estimate is 3% of the sales price of the home but that’s just an estimate. Your loan officer will be able to get you a much more accurate number once you’ve identified the home you’d like to put an offer on.
So when is it appropriate to ask the seller for help towards your closing costs? It really all depends on what is happening in the market wherever you are looking. When it’s time to write your offer, you’ll sit down with your Realtor and look at the most recent sales in the last 90 days to get a sense of if sellers are helping out buyers with closing cost or not.
Often times buyers may come to the conclusion that they are willing to offer full list price but want to ask for money from the sellers towards their closing costs. In this scenario, as far as the seller is concerned you’re no longer offering a full list price offer. All the seller really cares about is their net profit at the end of the day and and closing cost help comes out of their bottom line.
If you really need some help towards the closing costs and the market supports a slightly higher offer price, you could always submit an offer for say $3-5,000 over list price and then ask for that back from the seller in closing costs. Cash is king and that could go a long way in letting you attack some fixer upper projects sooner than later while only marginally increasing your monthly payment. Keep this in mind, for every $10,000 increase in loan amount that only affects your monthly payment by about $50.
If you’ve been thinking about buying a home the holiday season is a great time to buy. There is less inventory on the market but the folks who are selling their home during this period tend to be more motivated and homes statistically sell for less money through the holidays and winter than the busy spring season.
I know there are a lot of moving parts in the home buying process and it can seem overwheliming but the good news is it’s very manageable if you just take it one step at a time and of course you should work with a Realtor who understands your wants and needs and puts you first.
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