Profile picture for robdavisjr

seller paid $10k in closing costs & closing costs were only $9,300

My mortgage broker said that we cannot put the excess cash toward the principal. Is this true? or is he trying to increase the closing costs with points?

Thanks in advance,
Rob

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June 17 2011 - Bear
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Profile picture for robdavisjr
Thank you all for your insight. My loan was conventional, so I do not think that I could have used it toward mortgage insurance.

It seems that I should have pushed the issue more and understood the language in the contract (I blame myself for that much...). Next time I will see if we can possibly add language to the contract that would allow for any excess to be applied toward the principal. I did not want to buy down the rate at the time as we may move or refinance.

Thanks again for all the info.

Best,
Rob
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June 27 2011
Profile picture for SoCal Engr
This is where a knowledgeable LO seperates themselves from the crowd. In a similar situation, my LO was able to apply the excess towards required insurance.

Bottom line...

The knowledgeable LO will already know what can/cannot be done, and can "make things work".
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June 18 2011
I don't think they realize that a principal reduction on a purchase is the same as using it for down payment. 
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June 18 2011
absent any contractual specifications, the excess can be used to increase your down payment.
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June 18 2011
I had a similar situation occur about a year ago.  Buyer did not spend all of the settlement help allowed.  After waiting to see how the lender could make the deal work for 4 hours, buyer walked away from the settlement table.  After thinking the matter through, I asked the lender to buy down the interest rate with the excess funds which they agreed to do.  Buyer said he would have liked to have the principal paid down but now thanks me every month when he sends a lower payment..........................chris
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June 18 2011
My dear BKJH, I stand corrected. When it comes to spelling, I tend to be more of a numbers person, hence my profession. Bravo to you for catching that. I will mail you a cookie...

In regards to the difference between your response and mine, I'm sure you are aware, as most of us are, that loans these days are riddled with nuances and can rarely be explained thoroughly with one sentence answers. I believe I was simply being more thorough if that is acceptable to you. 

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June 17 2011
What is different about what you said from what I said Kenny; other than the fact that I spelled "principal" correctly?
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June 17 2011
As a Licensed Loan Officer as well as a Licensed Real Estate agent, I also agree with Shane Milne with the fact that seller paid closing costs cannot go towards the down payment. Every loan program I know of states that the down payment MUST come from the borrower's own funds or approved donors. The seller is not an approved donor unless the seller is a family member.

If there are excess funds that did not come from the borrower, the borrower is not allowed to get cash back. However, they may be used towards principle reduction if the lender allows it.
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June 17 2011
With FHA if the 3.5% down payment is satisfied from acceptable source funds, the excess seller credit may be applied as a principal reduction.
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June 17 2011
With all of the loan programs I am aware of the seller can't pay any of the buyer's down payment.
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June 17 2011
Profile picture for wetdawgs
Your broker is most likely correct.  If the $$ were specified as "towards closing costs" in the contract, they can't be redirected.  If it was " $10,000 for anything you want" in the contract, you can use it for anything you want.
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June 17 2011
 
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