How To Pay For Closing Costs
When structuring a mortgage home loan there are four ways to pay for the Mortgage Closing Costs: pay cash at closing, roll the costs into the loan, increase the interest rate, or do a combination of the aforementioned methods. When lenders offer “no cost” loans or “low costs” loans they are either rolling the costs into the loan and/or rolling the costs into the interest rate.
Four Ways To Pay For Mortgage Closing Costs
There are technically three ways you can pay for closing costs. These methods can pay for all your Closing Costs and Prepaids. The only thing these cannot pay for is your down payment.
Technically you can’t bring cash to closing; instead you need to bring a check, certified funds, do a wire transfer, etc. Watch our Closing video for the proper methods for paying costs at closing.
For refinance home loans you can increase the loan amount (assuming there’s room in the LTV) to pay for the closing costs. For purchase home loans the Seller Concessions are used to “roll the cost into the loan.” With today’s interest rates the monthly payment changes by approximately $5 to $10 for every $1,000 that is rolled into the loan on a 30-year mortgage.
An increase in interest rate offers a lender credit to reduce your closing costs. Visit our page on Premium Pricing to learn how lender credits are issued and why you would want them.
You can use any combination of the three aforementioned methods to pay for your closing cost. For example, you can have a lender credit that covers some costs, the seller could pay for some costs via concessions, and you can then write a check for the remaining balance.”
Please feel free to call if you would like to discuss a specific scenario. As always we are here to help and discuss which option may be right for you.