Financing your Closing Costs

When you’re buying a home, its almost a given to budget in your down payment for the home but Closing Costs is one of the things you have to factor in as well. The typical homebuyer will spend between 2% and 5% of the purchase price on their Closing Costs.

Here are a few ways to pay for your Closing Costs

  • Paying for them upfront by bring in the funds at closing.
  • Finance your Closing Costs with your home loan
  • Ask the Seller to help pay for some, if not all

Bringing in your remainder down payment $ and closing costs at closing might be painful, however it might benefit you in the long run. If you add closing costs to your home loan, your lender might raise your interest rate so lets say If you’re taking out a 30-year mortgage loan, that could significantly increase the amount you pay.

If you finance your closing costs, you will likely pay less money up front but before making that decision, it’s best to weigh the advantages and disadvantages of taking that route. So when does It makes sense to finance your closing costs? Financing your closing costs doesn’t mean you avoid paying them entirely, It simply means that you don’t have to bring thousands of dollars for costs when it comes time to close on your new home. If you’ve already spent a large portion of your savings on your down payment or short on cash, financing your closing costs over the term of your mortgage might be a good idea for you. Its also worth considering if you’re going to be refinancing your home. You might not end up paying too much extra interest, especially if you plan to pay off your loans quickly but it doesn’t hurt to explore all of your options before pulling the trigger. There are programs that provide down payment and closing cost assistance to qualified buyers.

Review some programs here: LINK

Depending on the Market, another way to reduce your closing costs obligation is by asking your seller to pay for part of your closing costs. The percentage of your closing costs that your seller can cover depends on the type of loan that you’re applying for. If the seller is reluctant to cover the closing costs, you could try raising the purchase price to seal the deal but that means you’ll end up paying more over the life of the loan.

Lastly, ask your lender if they’ll accept GIFT funds that you receive from a relative. If your lender is okay with that, its’s important to make sure you document the gift in detail to avoid any problems at closing. The more avenues you’re willing to explore, the more money you may be able to save.

Thank you for reading!

Blackrock Investments and Finance, Inc.
direct (951) 963-4023 | cell (626) 731-4485 |fax (626) 529-0850
email | web
CA DRE: 01884583


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