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Old 08-20-2008, 08:47 AM
 
2,257 posts, read 3,455,377 times
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I have a FSBO pre approved buyer for an older home in a small town. The buyer had to go through a broker because of family issues and a recent bankruptcy (like shes still going through it). She got her parents to agree to co sign and has a really strong work history and credit aside from the recent trouble with a failing business so I think she should get the loan.

As i called different lawyers and realtors to do the transaction one of the realtors was talking about closing costs. She was saying that because the buyer has to go through a broker they would have to pony up a percentage (she said 6% of the cost of the property) to cover the mortgage companies up front costs to write the mortgage. She said that could be included in the mortgage amount in a cash back like arrangement. The problem being that the buyer and I have already agreed to getting some cash back to do an improvement and I dont know if the home will appraise high enough to squeeze anymore out of it, it may.

Anyway my question is what are the typical closing costs on a mortgage. It seems to me when I bought in the past those costs were included in the loan whether I went through a broker or a bank. Im committed to making this deal go through even if I had to pay the closing costs but I'd rather not.

On my end for a transaction coordinator im getting quotes of $150 from a title company who will send me a package that I have to do all the paper work to $750 and $1000 from realtors who will bird dog the deal through to closing. I havent heard back from the Lawyer but expect he will be somewhere around that price. Any professional expertise with these issues would be appreciated
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Old 08-20-2008, 01:05 PM
 
Location: Cary, NC
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Are you a FSBO seller? I dont quite understand from the post, but it sounds like it.

There are quite a few disturbing items the way you are presenting this. Its hard to say what % of the price closing costs will be.... first it depends on yoru area. Some states have very expensive taxes and title insurance that add to the costs. Second, many fees are a flat fee... so say you had $5000 in costs total. Thats 10% of the sales price on a $50,000 home but only 5% on a $100,000 home. The attorney, appraiser, underwriter, etc won't care if the home is worth $50k or $200k, their fees will almost always be the same. I hear people throw around 3-4% of sales price but that is an estimate and can be far off if you have a very high or low sales price.

The fees between a broker and a banker should not be veryy different. Both can offer low or no closing costs options. Both can also fill a loan with junk fees and gouge a customer, it depends on the loan officer the buyer is using.

I am not sure what they meant by "included in the mortgage amount in a cash back like arrangement" and that just sounds fishy. There are programs where a seller can PAY a buyers closing costs, up to a certain limit depending on the program. The seller has no obligation to do so and the buyer is expected to pay their own closing costs if you have not negotiated otherwise. If the buyer is expecting you to pay the closing costs then they should have mentioned that prior to accepting an offer.


$150 for a package that you have to do all the work yourself (with no liability assumed by the title company) is a ripoff. There are lots of people that sell "FSBO kits" but they are a waste. You can usually get this information for free elsewhere. The only things you should pay for is actual services, if you are having a Realtor or attorney that will review the contracts or guide you through the process. This is where selling FSBO might sound better, but bad "free or cheap" advice could cost you much more than having a professional represent you.
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Old 08-20-2008, 01:13 PM
 
Location: Columbia, SC
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Can a recent bankruptcy get financing, even with a co-signer? I didn't think so but Mr. Carrillo can answer that better than myself.
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Old 08-20-2008, 02:44 PM
 
2,257 posts, read 3,455,377 times
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Thanks

I talked to a RE lawyer a little bit ago and he straightened alot of this out for me. As i read my post it is convoluted but thats because im unsure about some of the process. As far as the cash back it seems like a common practice. In my case the buyer wants a new furnace but doesnt have the cash to do it so they are going to borrow that amount and It will be their cash back to make the improvement, the Lawyer said he could put this in the PA.


I was just wondering if you could cash back to help the buyer with closing costs. In other words if I ponied up the closing costs and we just agreed on a higher purchase price to cover it.
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Old 08-20-2008, 05:35 PM
 
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If her lender allows it, you can do it. They may have a certain dollar amount they'll allow.
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Old 08-20-2008, 06:21 PM
 
Location: Orlando FL
1,065 posts, read 3,673,872 times
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Quote:
Originally Posted by bryan61 View Post
Thanks

I talked to a RE lawyer a little bit ago and he straightened alot of this out for me. As i read my post it is convoluted but thats because im unsure about some of the process. As far as the cash back it seems like a common practice. In my case the buyer wants a new furnace but doesnt have the cash to do it so they are going to borrow that amount and It will be their cash back to make the improvement, the Lawyer said he could put this in the PA.


I was just wondering if you could cash back to help the buyer with closing costs. In other words if I ponied up the closing costs and we just agreed on a higher purchase price to cover it.
Wow, cash back after closing is really a common thing where you are? Every Loan Officer I've ever spoken to lately says if the buyer is getting any cash back after closing (above what they may have put down in escrow) will kill any type of loan approval. Now paying closing costs for the buyer so they will be able to keep more cash on hand after closing is extremely common, up to a certain percentage (3% most times 6% sometimes)

If the borrower is still in bankruptcy I cannot see how they would be approved for financing. Even back when lending standards were loose as my fat pants lenders ould only fund after BK discharge. Co-signing on a mortgage doesn't usually exist (at least not like it works for cars or credit cards). Are you sure that it's not the parent that is purchasing it and the child will just be on title? Either way if the parent is needed to qualify for the loan I'd have them on the contract as well, as if only the child signd the purchase contract they will obviously not qualify on their own so they could use the financing contingency at any point and end up wasting your time.

Has your attorney advised you about whether these people are for real or not? Some attorneys are just paper pushers and just make sure everything is "in order" but don't give you the advice you need so you don't waste your time energy and money on contracts that are never going to happen....or advise you on how to negotiate a stronger contract with more protections for you should anything go wrong. A RE lawyer isn't always the do-all some people like to think they are, make sure he's going the distance for you.

Any current mortgage brokers around that could confirm some of the things I mentioned above? I haven't done a mortgage in several years, and I'm sure guidelines have changed significantly since then. In either case you really have to be in conact with the mortgage broker to make sure they are pre-approved andnot just pre-qualified, and also make sure you aren't raising the price to cover all these "give backs" that are going on so high that the buyer will no longer qualify for the loan, or that they don't add up to well over what the lender he's brokering through will allow. But enough with the free advice!
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Old 08-20-2008, 08:26 PM
 
Location: Columbia, SC
8,855 posts, read 17,455,857 times
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I assume it will be on the HUD, otherwise this is a major RESPA violation. I suggest you sit down go over this in detail with the attorney since there doesn't seem to be any Realtors involved. You'd to lose any money you may have saved on legal issues down the road.
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Old 08-20-2008, 08:42 PM
 
Location: Cary, NC
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Quote:
Originally Posted by Brandon Hoffman View Post
Can a recent bankruptcy get financing, even with a co-signer? I didn't think so but Mr. Carrillo can answer that better than myself.

I wasn't going to touch that part.... Since the owner doesn't know all the buyer's financials or situations I thougt it best not to comment.

Technically, maybe. But don't count on it. The general rule right now is 3 years since BK, 2 years in some special circumstances. If they are in BK still.... I can't think of any program, but there are "hard money" lenders and other options that might not care. Those of course require large down payments and the terms are not great.

Before many programs would allow you to get 100% financing evern 1 day after the discharge. Talk about crazy, you just finished BK the day before and a bank was letting you take a loan with $0 money down.
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Old 08-20-2008, 08:50 PM
 
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You are correct. As the process moves forward it appears his parents name will be on the mortgage. mY lawyer is in full cover bryans a$$ mode and wants earnest money on the PA, full disclosures and waivers all over the place to protect his new client. And yes only the buyers closing costs are allowed in the mortgage, the furnace deal we do on the side. Lookin at what the property assess at it wont be to far of a stretch an appraisal to get what we need out of the lender to get everything done.

What sux is this is a 2nd home I used as a rental so I will have to pay capital gains and stretching out the loan for money that wont go into my pocket and still paying the gains tax. All this will take me to just about to the lower range of what I wanted to walk away with. I suppose I should be happy that I might be getting this house sold in just a few weeks on the market.

This house was built in 1910, it has alot of charming aspects like the formal dining room and sunporch. I busted my a$$ over the last year completely Painted inside and out, sanded and polyurathaned hardwood floors (sunporch, living and dining romms and kitchen), replaced shower in one of the bathrooms, replaced 17' of foundation that was crumbling, de batted (nuisance control), landscaped, replaced fresh water plumbing, replaced several double hung window sashes and reworked 2 basement windows. Landscaping and basically fixed replaced or cleaned every eyesore in the house. When you do that in a small town word gets around and people line up to look at the house.

Whats funny is the guy across the street came over last summer when I was just gettin started and made a low ball offer for his son. When I told him what I expected to get out of the house (which is what im getting) he laughed in my face.


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Old 08-20-2008, 09:02 PM
 
Location: Cary, NC
1,036 posts, read 3,629,100 times
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Quote:
Originally Posted by GregTraub View Post
Wow, cash back after closing is really a common thing where you are? Every Loan Officer I've ever spoken to lately says if the buyer is getting any cash back after closing (above what they may have put down in escrow) will kill any type of loan approval. Now paying closing costs for the buyer so they will be able to keep more cash on hand after closing is extremely common, up to a certain percentage (3% most times 6% sometimes)
Yep on all counts. Cash back at closing is a big no. You can't get more back than you put in. People don't buy a home and walk away with a profit at closing, that just opens up all sorts of potential fraud.

The seller can pay your closing costs, 3% of sales price on most conforming loans, 6% on FHA. With higher down payments (>10%) then sometimes you can get more. Anything left above that the buyer has to pay. It MUST be disclosed on the sales contract and the settlement statement, and the money does not go to the buyer but to the people that charged the costs.

Quote:
Originally Posted by GregTraub View Post
If the borrower is still in bankruptcy I cannot see how they would be approved for financing. Even back when lending standards were loose as my fat pants lenders ould only fund after BK discharge. Co-signing on a mortgage doesn't usually exist (at least not like it works for cars or credit cards). Are you sure that it's not the parent that is purchasing it and the child will just be on title? Either way if the parent is needed to qualify for the loan I'd have them on the contract as well, as if only the child signd the purchase contract they will obviously not qualify on their own so they could use the financing contingency at any point and end up wasting your time.
Co-signing (technically, a non-occupying co-borrower) does exist for FHA loans. A parent or family member that isn't living in the home can co-sign and use their credit, income and assets to help with the approval. However it is hard to see how any amount of + on the parents will overcome the - of a current BK. Usually it would be better in such cases to do what you recommend, have the parents on the contract and they take the loan themsevles with the kids on title with them.

Quote:
Originally Posted by GregTraub View Post
Has your attorney advised you about whether these people are for real or not? Some attorneys are just paper pushers and just make sure everything is "in order" but don't give you the advice you need so you don't waste your time energy and money on contracts that are never going to happen....or advise you on how to negotiate a stronger contract with more protections for you should anything go wrong. A RE lawyer isn't always the do-all some people like to think they are, make sure he's going the distance for you.
Not only are these people for real, is the lender they are working with? I would ask for a solid pre-approval letter and google the lender and loan officer. Call them and ask pointed questions about the loan approval and the chances of this closing (a listing agent just called me to do it today, and I can understand why). The attorney will rarely offer opinions on the suitability of the offer.

There was a thread about how Realtors can't "practice law", well many attorneys don't want to "practice real estate". They will say if its legal or not and discuss basics, but they aren't going to offer an opinion as to what you should do or negotiate terms for you. Different job, different skill set.

Quote:
Originally Posted by GregTraub View Post
Any current mortgage brokers around that could confirm some of the things I mentioned above? I haven't done a mortgage in several years, and I'm sure guidelines have changed significantly since then. In either case you really have to be in conact with the mortgage broker to make sure they are pre-approved andnot just pre-qualified, and also make sure you aren't raising the price to cover all these "give backs" that are going on so high that the buyer will no longer qualify for the loan, or that they don't add up to well over what the lender he's brokering through will allow. But enough with the free advice!
Me as always I have the little house symbol, but I am on the mortgage side of the fence. As I said above, the OP needs to call that lender!

There are so many issues, they might not qualify as is, the house might not appraise, they might not qualify at the higher loan amount, the lender might not approve the money back for repairs, etc. Be careful.
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