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Hi all. I have seen that on average closing costs on a home are 2-5% of the purchase price. Does this include pre paids? We found a few houses we like, in the $500,000 range and should we expect the closing costs to be around $15,000? Is this including prepaying the property taxes in an escrow account for the rest of the year? We are going the FHA route. The way we are figuring it, we would need $17,500 for the down payment about $15,000 for closing costs, and then we need to prepay the real estate taxes from now until end of year which would be another $8,000, coming out to a little over $40,000 out of pocket.
Early in our search we were told we can get a "seller's concession" to roll the closing costs into the mortgage, but it seems all of the properties we put offers in didn't want anything to do with that lol. Is long island just too competitive of a market to get a seller concession and/or a low down payment?
We're thinking maybe we should just save more money and go with a conventional mortgage and maybe we would have a better chance with getting a house. Thanks
Hi all. I have seen that on average closing costs on a home are 2-5% of the purchase price. Does this include pre paids? We found a few houses we like, in the $500,000 range and should we expect the closing costs to be around $15,000? Is this including prepaying the property taxes in an escrow account for the rest of the year? We are going the FHA route. The way we are figuring it, we would need $17,500 for the down payment about $15,000 for closing costs, and then we need to prepay the real estate taxes from now until end of year which would be another $8,000, coming out to a little over $40,000 out of pocket.
Early in our search we were told we can get a "seller's concession" to roll the closing costs into the mortgage, but it seems all of the properties we put offers in didn't want anything to do with that lol. Is long island just too competitive of a market to get a seller concession and/or a low down payment?
We're thinking maybe we should just save more money and go with a conventional mortgage and maybe we would have a better chance with getting a house. Thanks
-first time home buyer
Yes, Long Island homes in your price range are in high demand overall.
While FHA will let you roll closing costs into the mortgage and permits seller's concessions, sellers and many agents don't understand the process; what people don't understand, they don't accept.
Not sure if you realize what that means in terms of the appraisal. If you're offering $500,000 and the seller accepts, and you then want a 3% concession, the house now has to appraise at $515,000. Often sellers/their attorneys/agents don't want to risk a "low" appraisal and will move on to another buyer.
Keep in mind, it's not just about price for the seller, but also terms!
On the other hand, putting down a minimum AND asking for a concession gives the impression of a marginally qualified buyer = uncertainty regarding closing as agreed. Not saying that's what you are, only explaining that this is how it might come across to sellers. Sellers want as much of a "sure thing" as possible, and there are plenty of buyers out there for that price range.
Yes, Long Island homes in your price range are in high demand overall.
While FHA will let you roll closing costs into the mortgage and permits seller's concessions, sellers and many agents don't understand the process; what people don't understand, they don't accept.
Not sure if you realize what that means in terms of the appraisal. If you're offering $500,000 and the seller accepts, and you then want a 3% concession, the house now has to appraise at $515,000. Often sellers/their attorneys/agents don't want to risk a "low" appraisal and will move on to another buyer.
Keep in mind, it's not just about price for the seller, but also terms!
On the other hand, putting down a minimum AND asking for a concession gives the impression of a marginally qualified buyer = uncertainty regarding closing as agreed. Not saying that's what you are, only explaining that this is how it might come across to sellers. Sellers want as much of a "sure thing" as possible, and there are plenty of buyers out there for that price range.
Thanks. My only confusion is with the prepaid taxes. How much do I have to prepay of the taxes? I can't get a clear answer doing a google search, people say it depends on the lender, some people say pay a full years taxes up front, while others say only a couple of months (depending on when you close).
We are now thinking we should just wait and keep renting and save more money. We'd like to have a nice amount of a cushion to do some renovations, and have a safety net. Didn't realize how high closing costs would be.
Wife and I earn $160k combined. Are we going way over our heads looking for houses in the $450-550k range? Our loan officer approved us for up to a $600k house.We just don't want to struggle paying a mortgage.
Lastly...we were told by our agent that we may have a better chance looking in suffolk to get a seller concession. Nassau being too competitive of a market. Thanks again for the help!!
I paid 6 months of taxes (prorated) when I closed on October. I believe school taxes were due at that month. Closing cost was around $8k
This was a cash deal so no lenders/escrow was involved.
Maybe you could do conventional with 3%? That is what we are doing. PMI is less than FHA premiums and you don't need to refinance to get rid of it. First time home buyers also. We are closing next month. Luckily, seller accepted seller's concessions and house appraised good. Seller's concessions were not contingent, so we would have to go with it if the appraisal was lower.
Our closing estimate is about $19000(including taxes for 6 month,but taxes are low). Hope actual closing will be lower.
Our lender needed 6 month of taxes as tax bill needs to be paid soon.
For us, we are still relatively young, just got a big promotion at work and can now afford a mortgage but do not have a huge down payment of 100k or more yet. I can continue to rent and throw that money away, or at least owning a home we are paying some principle, even though it's mostly interest at first it is still better than nothing to build some equity.
To people saying 3% down is crazy, I do agree. But to come up with $100,000 (20% down) for the average $500,000 house on LI, plus closing costs and having a few months mortgage payments as a safety net and a healthy savings/emergency savings account, that's close to $200k. I didn't know too many people that were able to save $200k in our age group at 25-30 years old. It will be easier now to save since I am married and we have two incomes, but we've been only married a year.
Is it better to just rent and save up for a few more years and put a bigger down payment? We were excited to buy a house but don't want to get in over our heads. Thanks
You could try to keep the taxes and insurance out of escrow, pay them on your own. Of course, this might not be possible with the loan you are describing. But it doesn't hurt to ask.
You could try to keep the taxes and insurance out of escrow, pay them on your own. Of course, this might not be possible with the loan you are describing. But it doesn't hurt to ask.
Lenders won't consider it with less than 20% equity. Too much risk for them. (I asked several on behalf of my buyers)
Lenders won't consider it [pay taxes direct rather than escrow] with less than 20% equity. Too much risk for them. (I asked several on behalf of my buyers)
I am a big fan of doing the non-escrow thing, have been so since the 1970s. Of course with the current 10K cap it's not as useful taxwise as it used to be, but who knows what will happen with the SALT when the tax bill provisions sunset in 2025. It may go back to the way it was, for all we know, depending on 2020 elections. Or the cap may be raised.
Of course someone could start out by escrowing now and then switch to direct pay later, but then bank might not agree.
IMHO anyone who has less than 20% equity probably shouldn't be buying at all... but that's just me.... I remember when 25% - 30% down was considered the responsible minimum.
(yeah, I'm old LOL)
Last edited by BBCjunkie; 04-23-2019 at 10:31 AM..
IMHO anyone who has less than 20% equity probably shouldn't be buying at all... but that's just me.... I remember when 25% - 30% down was considered the responsible minimum.
(yeah, I'm old LOL)
Putting down 30% worked out well when you could buy a house that cost around 2.5x the average annual salary. That ratio is now 4:1 or higher.
Unless you are able to live at home for an extended period or get gifted the down payment it's become increasingly difficult to save even 20% for new homebuyers.
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