When you buy a home, you have a lot of costs to worry about. Not only do you have to worry about the earnest money and down payment, you also have closing costs. When you add them all up, you could be talking tens of thousands of dollars.
If you don’t have that kind of money, you might find yourself panicking. Will you ever own a home? We think you will. You just have to know how to go about the process. First, there are mortgage programs that require small down payments, such as the FHA or USDA loan. However, you can take it even further and get help with your closing costs by the seller himself.
You might wonder why anyone would want to pay your settlement costs for you, but the seller is motivated too. They want to sell their home and if helping you with your costs is the only way, then they might just be willing.
Keep reading to learn the top ways to convince your seller to help you.
Offer Full Asking Price
The very first step is to offer the full asking price. We know, no one likes to do that, but it will help you if you need assistance with the costs of the loan. You want the seller in a good mood so that when you start negotiations, namely asking for financial assistance, they will be willing.
Giving the seller full price for the home is something he is not expecting. They often ask a slightly higher price so that they know they will end up where they need to be when negotiations are done. If you come right out of the gate and offer the asking price, you’ll already be in the seller’s good graces.
Limit Your Contingencies
Buying a home usually means throwing in a few contingencies in the purchase contract. These contingencies give you an ‘easy out’ should you not want to buy the home anymore if things don’t work out.
However, those contingencies don’t sit well with the seller. Since they are meant to protect you, the seller could be left with a house to sell after taking it off the market for you. Some contingencies are hard to skip, so make sure you consult with your attorney before making this decision. You need protection, but if you need help too, you have to give the seller a little breathing room.
Accept the House As-Is
Oftentimes, buyers demand that sellers make changes to the home after the inspection report comes back. If there’s something wrong with the house, buyers often threaten to not buy the house if the seller doesn’t fix an issue.If you can offer your bid ‘as-is’ that means you won’t ask the seller to change anything. The seller may be more willing to give you concessions if you won’t require him to make changes to the house.
Meet the Seller Halfway
Asking the seller to pay all of your closing costs may be too much. If you offer to meet him halfway and split the difference, you might have a better chance. Let’s say it will cost you $10,000 to close the loan. If you ask the seller for $5,000 and you pay the other $5,000, he may be willing since you are putting your own money in too.
How Does it Work?
It might seem like this is all one-sided. The buyer gets the house and gets his closing costs paid. However, in reality, you still pay the costs yourself. By offering a higher price for the home, you’ll need a larger mortgage. You then wrap those costs into the mortgage. The seller just ‘concedes’ the money at the closing. It’s all done right on the settlement statement; the closing agent deducts the amount of money the seller agreed to concede right out of the check given to the seller.
The seller never physically hands you money. It’s all done on paper, with the final amounts being disbursed to the appropriate parties. The seller technically doesn’t pay your closing costs for you – you pay for them over the life of the loan.
Here’s an example:
You offer $150,000 for a home. The seller accepts the bid. You have USDA financing so you don’t have to put any money down. You ask the seller to cover your $5,000 in closing costs and he agrees since you gave him full price for the home.
You get a mortgage for the full $150,000 because the house appraised for that much. The seller gets a check for $145,000 minus any other costs he must pay as the seller. You get a new mortgage and the keys to your new home.
Now, if you paid your own settlement costs and offered the seller $145,000, you would have had a mortgage amount of $145,000 rather than $150,000. Instead, you’ll pay the interest on the additional $5,000 in order to come to the closing table with no money.
Many sellers are more willing than you realize to help you with your closing costs. It’s best to discuss it upfront during the initial negotiations. This way everyone is on the same page when going through the home buying process.Click to See the Latest Mortgage Rates»