Who Can Pay Closing Costs? Seller, Lender, Realtors; Happy Veterans Day

JVM Lending will be working a half day today because of the Veterans Day Holiday. We will, however, have a Mortgage Analyst “on call” all day and all weekend, per our usual practice.

We frequently have transactions with closing costs as high as $20,000 with title, escrow, appraisal, underwriting fees, impounds, transfer tax, sewer lateral, etc.

B/c buyers sometimes lack sufficient funds for closing costs, we thought we’d remind everyone of alternative sources for funds.

1. Seller Credits for Closing Costs. This option is not popular in hot markets, but sellers can credit up to 6% of the purchase price towards closing costs. Some loan types allow for credits up to 9% even.

2. Lender Credits for Closing Costs. All lenders are happy to offer this option, but it results in a higher interest rate. Today, an increase in rate of about 1/4% would result in a closing cost credit of over 1% of the loan amount for most of our conforming loans, for example.

3. Realtor Credits for Closing Costs. This is not something we ever tout to buyers b/c it is never our role to give away somebody else’s hard-earned commission. But, it is an option Realtors should be aware of for extreme cases. Realtors can credit commissions towards closing costs.

Final Note: Closing Cost Credits can cover both recurring (interest, property taxes, insurance) and non-recurring closing costs. Back in the day, some lenders restricted credits to non-recurring costs only, but those restrictions are long gone.

Jay Voorhees at (925) 855-4491
Real Estate Broker, CA Bureau of Real Estate, BRE# 01524255, NMLS# 335646