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Using Higher Rate To Pay for Closing Costs; Lender Credits

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.

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.

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.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646