closing costs questions (PMI, credit, financing, sales)

[ILMomof4]

Is it better to offer a seller less money or ask them to cover closing costs? Is there much of a difference between the two. We thought of offering almost what they were asking for the purchase price but asking them to cover closing costs.

[TimtheGuy]

If you don't need them to pay your costs, get the lower price on the house, otherwise you are financing those costs for 30 years. Now if cash is tight, you are much better having them pay the costs and saving your money for emergencies or repairs to the home.

[lacierandall]

In this market I would do both... worst that they can do is counter offer...

[ndb3]

+1 ^^^^

[sneezecake]

Originally Posted by lacierandall

In this market I would do both... worst that they can do is counter offer...

Well, no...worst they can do is reject your offer. Slight difference.

[Rakin]

It really depends on your needs. If you're tight on cash get them to pay some or up to maybe 3%. Usually they figure it into the offer anyway. That's why sometimes you'll see the sales price slightly above the asking price.

[pghquest]

Originally Posted by ILMomof4

Is it better to offer a seller less money or ask them to cover closing costs? Is there much of a difference between the two. We thought of offering almost what they were asking for the purchase price but asking them to cover closing costs.

Get them to pay closing costs.. Lets do the math on a home with a $100,000 asking price

option 1, You ask them to pay 6% in seller concessions
$100,000 purchase price, you need $14,000 down (20% - 6% seller concessions = 14% down) to avoid PMI, leaving your mortgage at $86,000, monthly payment $515.61

option 2, If you ask a lower price
$97,000 purchase price, you need to put $19,400 down to avoid PMI + about $3000 for closing costs, leaving your mortgage at $77,600, monthly payment $465.25

While your mortgage payment on option 1 is $50.36 a month more, your putting less down to save on your PMI (about $75 a month)

Add into this, that if you did have the $19,400 down, and put this down on option 1, instead of $14,000, your mortgage will be only $77,600, meaning that your monthly payment will still only be $465.25 a month, + you clearly will avoid the extra PMI fee.

The less you put down, the more this works to your benefit, because the seller is paying your closing costs directly and actually crediting you back 3% of your down payment, meaning you'll reach your PMI minimum faster.

[Erma]

Go for a home warranty plan with the seller. It will take alot of headaches away and costs the first year. The Inspector doesn't foresee the real problems!

[veuvegirl]

We were tight with closing costs and asked the sellers to pay part of the costs. We included this with our offer. It was a great way to help with the cash flow. Sadly we didn't realize how high these were when budgeting for the move.