There’s 3.5%, 5%, 10%, 20%… are these your possible winning percentages at a casino here in Vegas? Nope… they’re the possible down payment options for your new home, depending on the loan program.
You’ve saved and saved, stopped eating out, and put in overtime at work just so you can save up even more. You’ve talked to a Lender and have been pre-approved for a home loan.
You know you’re buying power. Your bank account is padded and you’re ready to house hunt… but what’s this “closing cost” thing?
Just because you have your down payment and you’ll be borrowing the difference for that new home, there are still fees to be paid at your closing. Closing Costs are a combination of your Mortgage Company’s Fees (they vary between Lenders), Prepaid County Taxes, Prepaid Annual Home Insurance, Home Warranty, Title Company Fees, etc.
Add them all up and these fees typically range between 2%-3% of your purchase price. Suddenly you’re no longer saving just for that down payment amount — you have other significant costs too!
Now that you know what closing costs are, let me tell you about several options on how to deal with them…
With my Buyers, I attempt to have the Seller contribute a sum towards the closing costs when we’re negotiating the deal. Remember that Sellers are looking for a “net number” when selling their home. The combination of a reasonable and strong purchase offer while asking for that closing cost contribution can absolutely get a deal done — and often does.
Another option would be to take advantage of the numerous down payment assistant programs currently available here in Nevada. One that I’m well versed on (and have several YouTube videos about) is the “Home is Possible” grant program.
This allows up to 4% of the purchase price to be used as part of your down payment and/or closing costs. As a grant it doesn’t have to be paid back — it’s basically “free money!” Find out if your Lender participates in the program and if not, I know several who do.
In a recent deal we were able to combine the Home is Possible money along with a Seller’s closing cost contribution to allow our Buyer to come to the closing table with barely anything out-of-pocket. It was practically 0% down for their new home!
The key is to have the best Vegas REALTOR represent you throughout the home buying process. If you or someone you know could use our expertise to be successful with a house purchase, contact me today!
– Mike Rebarchick
Update: Here’s a funny but helpful video we just posted on YouTube. It explains closing costs and provides some tips on how to save money when buying a home:
p.s. The link below also discusses the confusion about closing costs that many future homeowners were unaware of:
http://www.usatoday.com/story/money/2015/03/25/closing-costs-a-mystery-to-millennials/70441668/
Photo by: johnnyvulkan
