Many homebuyers are tight on cash and barely able to come up with down payment funds. We often offer such buyers lender-credits for closing costs. Closing costs for a “no points” loan (both recurring and non-recurring) can vary from $7,000 to $15,000. Closing costs, of course, depend on the purchase price, loan amount, the time of year the purchase is closing, and whether or not there is an impound account.
Leveraging Higher Rates for Lender Credits
Increasing one’s rate by 1/4 percent can generate a closing cost credit (from the lender) of as much as 1.5% to 2% of the loan amount.
Calculating the Cost-Benefit Example
For example, if the loan amount is $400,000, increasing the rate by 1/4% will result in an increased payment of about $55 to $60. But, it will also yield between $6,000 to $8,000 in credits for closing costs.
