Options for Down Payments and closing costs with Sabrina Schell
Sabrina Schell, a lender that I work with a lot and I got together to talk about mortgage programs and down payment.
There’s a survey out there that says that buyers are still thinking they need 20% down in order to get a loan. I know that they can get a mortgage with a lot less than that. Sabrina shared some of the programs that are little to no down payment.
- FHA is as little as 3.5% down.
- USDA and VA offer 100% financing.
- Conventional loans are as little as 3 to 5% down.
These different options depend on where the property is, what the buyer’s looking for, and what their overall goal is with their finances. For example, how long they intend to keep the house and other things like that.
Closing cost is another question I’m getting asked about a lot. When I talk to clients, for most houses that are under $300,000, I’m telling them to expect 2.5 to 3% of the loan amount in closing costs that are associated with the loan. According to Sabrina that is a fair assessment. Much depends on the market. In some cases, you’ll be able to negotiate for the buyers to have the sellers pay the closing costs. We can help pay some or all of the closing costs. That does come at a slightly higher interest rate, but it’s still a better option than having to wait to buy a home. For example, $2,000 to $3,000 in closing costs can be covered by us for them for $10 to $15, $20 a month.
Plan A and Plan B
In a lot of the scenarios that we’re seeing, we’re negotiating back and forth with the seller. We could have Plan A that the seller will pay all the closing cost and Plan B would be that you would pay some or all the closing costs. Sabrina shared, “In fact, this happened to me this weekend. My folks were negotiating, asking the seller to pay $5,000 in closing costs and the seller felt like that was not going to work out for them, so they asked for $2,500 and we paid the other $2,500. They’re happy in they’re closing.”
Sabrina shared that we need to know that there are different options out there. You have to be a little bit flexible. Based on her experience in the market she knows that there’s still a high demand out there. Often she is finding situations where offers are written and then she has to go back and forth a little bit. The first offer is not necessarily accepted.
It is important to have a Plan A, Plan B, Plan C.
I think what we’re talking about is talking with the lender in advance, making sure that we know the plans. Talking to a lender before we write an offer so we’re crystal clear on what the options are for that particular house, that particular time frame is ideal.
If you have any specific questions for us, feel free to contact us.