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I would have to know the details of your situation. If your problem is not much money for down payment and closing costs, your best bet is probably an FHA loan with a seller's concession. It works like this:
Purchase Price: 200,000
Seller Concession: 12,000
Contract Price: 212,000
Down Payment: 6,360 (3% of of 212,000)
Mortgage Amount: 205,640
At closing, the seller gets his 200,000 and you use the 12,000 Seller Concession to help pay your closing costs.
I am buying a house on LI now too and getting quite an education. I put an offer on a short sale but need the sellers concession too and it is doubtful the bank will consider my offer.
However, I was informed that Wells Fargo has a grant program for first time buyers (or having not owned a home in the last 3 yrs) and it can take the place of the sellers concession. For Suffolk County it seems it can go up to $15,000 towards the closing costs and down payment. I'm gonna try for it.
VA (veterans) loans do not require a down payment; they are about the only program currently that doesn't and with a seller concession it can be very helpful.
I would have to know the details of your situation. If your problem is not much money for down payment and closing costs, your best bet is probably an FHA loan with a seller's concession. It works like this:
Purchase Price: 200,000
Seller Concession: 12,000
Contract Price: 212,000
Down Payment: 6,360 (3% of of 212,000)
Mortgage Amount: 205,640
At closing, the seller gets his 200,000 and you use the 12,000 Seller Concession to help pay your closing costs.
In today's market, I don't think any bank will give you a mortgage if you tell them that you need a seller's concession to cover the closing cost. But then, hey, you never know. They are the ones who created all these "creative financing" schemes.
To the OP, if you truly can not afford the house you are trying to buy, why can't you just find a cheaper one or rent for a while? With these kind of creative financing schemes, you will end up with negative equity right off the bat. In Tom's example, the bank owns more than 100% of "your" house. The market is currently in a foreclosure crisis. Think for a moment. What is the root cause of this crisis?
It's not that we can't afford the house. Someone mentioned this to us and there is nothing to loose by looking into it. We'd rather put an assitional $10 or $15.000 in downpayment if there was something out there which we did _ualify for.
We closed on our new house in farmingdale on april 15, 2008. We had a $15,000 seller concession which was great. The lender was first franklin and the loan has been sold already to wells fargo. The first house we bought we payed the closing costs upfront and my wife and I vowed to never do that again. My friend just closed on his mortgage through citi with a sellers concession one month ago. Seller concessions are indeed taking place.
It's not that we can't afford the house. Someone mentioned this to us and there is nothing to loose by looking into it. We'd rather put an assitional $10 or $15.000 in downpayment if there was something out there which we did _ualify for.
I don't see how seller's concession can help you.
The rebate you get from the seller is not free. It's money you borrow from the bank, which you have to payback with interest. For example -
no concession:
200k house
you put down 40 + 20 closing and borrow 160 out of pocket: 60k
borrowed: 160k
220k on paper
you put down 60k (you said you want to use the closing money as additional down payment) and borrow 160. The seller pays the closing cost. out of pocket: 60k
borrowed: 160k
The only difference is the artificially inflated price of the house and perhaps the slightly higher commission for the RE agent. Did I miss anything? Well, it is a different ball game if you hide all of these from the bank. That, however, will make this practice an illegal scam.
It is very legal to have a seller's concession. Lenders allow it, and it is usually a percentage of the purchase price/loan. The advantage of a concession is basically that it is less money out-of-pocket for the buyer, which then allows him to take what would have been cash down at closing and turn it into home repairs, etc.
It is very legal to have a seller's concession. Lenders allow it, and it is usually a percentage of the purchase price/loan. The advantage of a concession is basically that it is less money out-of-pocket for the buyer, which then allows him to take what would have been cash down at closing and turn it into home repairs, etc.
I am not saying it is out right illegal. If you inform the lender and follow the lender's standards then it is perfectly legal. Otherwise, it is a scam. In my opinion, if the buyer can not afford the closing cost, I think he/she is stretching his/her budget a bit too far. Perhaps I am just a bit too conservative.
Also, I don't see how it saves money for the buyer. If the house needs immediate repair, a smart buyer should have negotiated the cost of the repair into the price already, especially in this market. This whole seller's concession scheme is jut to get a larger loan for the buyer which he/she would not qualify otherwise. I believe this is how toxic loans are manufactured
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Wells Fargo
