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Answers (9)
Best Answer
- Georgina OBryan, "GOBryan1"
- Contributions:483
Money for closing costs will go towards closing costs, not the down or improvements. If the home needs work, you may wish to put less down, if the monthly contribution is affordable for you, and use the rest for repairs.
You made a comment that you plan to refinance and you haven't even obtained a mortgage yet. Remember that everytime you refinance, you pay closing costs all over again, even though it may appear seemless. A total waste of money. Try to get the mortgage you want or close to it rather than refinancing later on. It'll save you money. A Refi can cost around $6000 in closing. You just may not be aware of it since it's not out of pocket but still applied as part of the loan providing you have the equity. It may also extend your term as well.
Another thing to take into consideration is that taxes are paid in arrears so you may pay more the first year than the next or vice versa. Insurance will also vary from year to year, so don't tap yourself out with your monthly payment or you may find yourself in a financial bind later.
- mymortgagebrokerjoe
- Contributions:129
if you can afford it, a 15 year FHA loan may be the way to go - apr is around 4%. at 90% ltv, ther is no monthly pmi, and the upfront mortgage insurance premium is only 1%, which can either be rolled into loan amount or paid in cash by you. if you pay cash for the upfront premium, then you can have your employer reimburse you for that expense.
- Dennis Curcio, "Dennis Curcio"
- Contributions:14
You mention PMI ending early. You should check this carefully. Mortgage insurers have revised their terms to protect the income streams from the policies.
Usually there is a minimum term for MI. Especially with FHA loans. You might find yourself paying PMI for much longer than you thought. To avoid this, try to get the LTV down so MI is not required.
Usually there is a minimum term for MI. Especially with FHA loans. You might find yourself paying PMI for much longer than you thought. To avoid this, try to get the LTV down so MI is not required.
- Martin Wareing, "Martin Wareing"
- Contributions:3772
jewell,
You are probably maxed at 6% total from all sources. MI, (commonly called PMI) for conventional loans can be "removed" without refinancing.. Usually, it is 2 years for you to "request" the removal from the lender.. If they say "yes", then you will be required to pay for an appraisal only. If the appraisal holds up and you mee the equity requrements, the MI is removed. The MI is not a constraint from the MI companies themsleves, so they will drop coverage when the Lender advises them. Use the maximum contributions you can on the HUD-1 to buy your lowest rate/terms without any additional costs being absorbed by you. Depending on the contract, Buyers costs/prepaids in Central FL run about 3% +/- a few dollars if you do not pay any "net" points for the loan. Meaning, you have 2+% in points to buy down the rate OR if the lender has a SIngle Premium MI program available, you would have the option to use that to "prepay" the MI and you would never know of MI in your monthly payment. Stay the course on the short sale as they require patience. I wish you well.
You are probably maxed at 6% total from all sources. MI, (commonly called PMI) for conventional loans can be "removed" without refinancing.. Usually, it is 2 years for you to "request" the removal from the lender.. If they say "yes", then you will be required to pay for an appraisal only. If the appraisal holds up and you mee the equity requrements, the MI is removed. The MI is not a constraint from the MI companies themsleves, so they will drop coverage when the Lender advises them. Use the maximum contributions you can on the HUD-1 to buy your lowest rate/terms without any additional costs being absorbed by you. Depending on the contract, Buyers costs/prepaids in Central FL run about 3% +/- a few dollars if you do not pay any "net" points for the loan. Meaning, you have 2+% in points to buy down the rate OR if the lender has a SIngle Premium MI program available, you would have the option to use that to "prepay" the MI and you would never know of MI in your monthly payment. Stay the course on the short sale as they require patience. I wish you well.
- jewelldp
- Contributions:2
Thanks everyone for the feedback. I am reluctant to go back to the bank and ask for a reduced price in lieu of closing costs because it took six weeks to get the answer back in the first place. So I want to make the best of the current scenario. I like the idea of an upfront PMI payment to eliminate the monthly. I also pay the closing costs in excess of what the bank pays directly and then get reimbursed so I don't believe there will be any problem with capping total costs. I think i will either go 90/10 with a prepaid PMI or just go FHA with the bank paying the initial PMI associated with that.
- Danielle Smith, "DanielleCSmith"
- Contributions:6
We now offer a program where the mortgage insurance can be paid using a one time premium if you have 10% down. You may want to see if your lender offers anything like this. This way you would take advanage of closing costs being paid for you and reduce your payment by the amount of the monthly mortgage insurance and you would not need to refinance later. If the seller or relo company is willing to pay points to buy the rate down this is another good option. Good luck!
- wetdawgs
- Contributions:26833
Please note, if your contract is for seller to pay closing costs and your relocation includes closing costs, this money is for closing costs and not money where you can say "ooops, extra, I think I'll paint the house'.
- wayne lancaster, "funds2"
- Contributions:1177
With 10% down I presume you are doing a conventional loan, so 6% would be max. seller contribution. You have an interesting scenario as your relcocation package will likely only include closing cost you pay, so if seller paid 3.5% that would likely cover all closing cost, pre-paids, and 1% origination fee to buy rate down. PMI is not an issue since that is monthly and will be eliminated if you really can refinance in a year or so and value has increased 10% or more. The only leeway would seem to be with seller reducing price of house in lieu of all of the 3.5% contribution. You could use some of that to buy the rate down even more if your plans are long term in the property but there is a point of diminishing return vs getting benefit of lower price and lower rate. Have loan officer sharpen pencil and use up relocation allowance first and see what else seller could pay and reduce price with what is left over.
- Steve Roake, "Steve Roake"
- Contributions:285
Check with your lender but you may not be able to use all of your closing costs. FHA, I believe only allows 3% anymore. Conventional may allow for more, but how much could you possibly need. I'd suggest you renegotiate with the seller to lower the price by 3.5% and use the company money and your down payment to pay your closing costs/downpayment.
Again, check with your lender, realtor, attorney, CPA, etc to decide the best course of action.
Again, check with your lender, realtor, attorney, CPA, etc to decide the best course of action.
I have the seller and third party paying closing costs. What is the best way to spend it?
I am purchasing a short sale home and the bank has agreed to pay 3.5% of closing and prepaid costs. After the fact, I learned my company, as part of a relocation package will cover 3% of closing costs (not points, but orgination and other standard costs). I had planned on putting 10% down on the $240K home and dealing with PMI until I can refi. The home needs some work and I believe based on comps I could remove PMI within a year. What is the best way to structure this to take advantage of the dual closing cost coverage? My goal is really a lower payment long term, we have a decent reserve of cash for upgrades even with 10% down.
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