Nesties that have bought a house

userdeleted · May 2009

I am really confused by something my lender is telling me right now.

We are under contract on a house, we offered their asking price and asked that they cover our closing costs. They countered with like, 2/3rds of our closing costs and we accepted.

We were under the impression that this means that they bring $X of their cash to the table, but now our lender is telling us that actually what they do is raise the sale price of the home? I told him this didn't make any sense to me because a) That means that we are actually paying it, b) Then why wouldn't they just have agreed to cover all the closing costs, it shouldn't make a difference to them since it's going to be our money, and c) We passed on an earlier house because the sellers couldn't pay any of closing costs - because they didn't have any cash.

He said that "99% of loans" are done this way, and that they didn't cover all of the closing costs because they didn't want to price the home for more than they thought it would appraise for. Am I missing something here? I'm starting to feel very uncomfortable with the situation and unless he can explain this to me in a way that doesn't make me feel like he's taking advantage of me very very quickly, I am going to find another lender, even if means losing this house.

Anyone know what the heck he's talking about? Am I totally wrong here?

MrsL.inMarch · May 2009

I've never heard of it going down like that and it makes no sense to me. The final sale price will also effect taxes and crap later on. Something is fishy.

kim1730 · May 2009

I'm pretty sure what you described is having your closing costs rolled into your mortgage, which I've heard of before. But thats not the same thing as having the seller pay for your closing costs

Gina418 · May 2009

Wow - something is fishy! If they wanted to cover your costs w/o bringing money to the table they would lower the price - not raise it! I doubt 99% of loans are done this way!

CFO · May 2009

kim1730:
I'm pretty sure what you described is having your closing costs rolled into your mortgage, which I've heard of before. But thats not the same thing as having the seller pay for your closing costs

THIS. He's scamming you, and adding the costs to your mortgage. So not only are YOU paying it, but with INTEREST! He sucks. And is lying.

ali-1411 · May 2009

Its done that way if you want your closing costs included in your loan. Its wrapped up as part of the sales price. But that's YOU paying the costs. If the seller is paying the costs then that wouldn't be the case. I don't think so, but I'm no expert.

Your realtor should have had all that specified in the offer letter, right?

(ask Crazy on the atx board, she'd probably know)

jade_sweatpea · May 2009

kim1730:
I'm pretty sure what you described is having your closing costs rolled into your mortgage, which I've heard of before. But thats not the same thing as having the seller pay for your closing costs

This!

JamieFL · May 2009

I can share my experience when I sold my house and the buyer was in the same position that you are.

Basically, the buyer of my home didn't have the cash for his closing costs and wanted to finance them. That being said, the house had to appraise for the value of the additional closing costs. Let's say that I sold the home for $100,000 and the final contract said $107,000, which is the amount they financed. Hope that makes sense!

What you're describing isn't right because IF they agreed to cover some of your costs, then the house price on the contract should be lowered? Don't you think?

I'd call another lender or talk to an unbiased realtor. GL!

Lerxie · May 2009

If this is how he explained it, he is lying. The sale price of the house will not go up when a seller agrees to pay a portion of closing costs.

userdeleted · May 2009

kim1730:
I'm pretty sure what you described is having your closing costs rolled into your mortgage, which I've heard of before. But thats not the same thing as having the seller pay for your closing costs

Right exactly, and that's what I said to him. He was very clear that no, this was the seller's costs.

He tried to use a hypothetical example to explain it:

"Say you were a seller and you wanted to get $100k for your house, but the buyer wanted you to cover their closing costs. Well then you'd just raise the sale price to $103k, so that you still get the money you want for the house."

wtf. This is not right.

*KatieH* · May 2009

He is wrong, get a new lender.?

jillybean222 · May 2009

if they are raising the price to cover your 1/3 of the closing costs, it makes sense. if they are raising it to cover the seller's portion, it does't make sense (to me, anyway). we paid cash for out closing costs so i could be wrong but that sounds weird to me too. if they are lowering the contract price, that makes sense too, but the way you explained it does not.

Amrice78 · May 2009

kim1730:
I'm pretty sure what you described is having your closing costs rolled into your mortgage, which I've heard of before. But thats not the same thing as having the seller pay for your closing costs

I agree with this. Often times when the buyer pays the closing costs they get added to the loan amount (but not the price of the home - the seller doesn't get the extra money - the bank, etc does), but it does not make sense that your loan goes up if the seller is supposed to be paying the costs. Do you have a lawyer? I'd recommend talking with one as most of the mortgage/homebuying information can be overwhelming and confusing.

lmdbww · May 2009

Were you going to pay the rest of the closing costs out of pocket or roll them in to the mortgage?

It does sound fishy and you should get to the bottom of it, stat.

Pacheco825 · May 2009

No, something is going wrong. Call your realtor, maybe they can help you. Your lender is scaming you I think. He is talking about rolling it into your mortage.

CFO · May 2009

JamieFL:

What you're describing isn't right because IF they agreed to cover some of your costs, then the house price on the contract should be lowered? Don't you think?

No. The costs payed at closing are fees that don't raise or lower the price of the house.

TheNewMrs.H · May 2009

Didn't work that way with our place. They brought the money to the table.

kim1730 · May 2009

Rach03k:
kim1730:
I'm pretty sure what you described is having your closing costs rolled into your mortgage, which I've heard of before. But thats not the same thing as having the seller pay for your closing costs
Right exactly, and that's what I said to him. He was very clear that no, this was the seller's costs.
He tried to use a hypothetical example to explain it:
"Say you were a seller and you wanted to get $100k for your house, but the buyer wanted you to cover their closing costs. Well then you'd just raise the sale price to $103k, so that you still get the money you want for the house."
wtf. This is not right.

I would first double check your contract to make sure the sellers actually agreed to pay your closing costs as opposed to letting you roll them into your mortgage. Either your contract isn't right or your mortgage guy is not understanding it properly.

Amrice78 · May 2009

jillybean222:

if they are raising the price to cover your 1/3 of the closing costs, it makes sense. if they

this makes sense. is the price going up the amount of your 1/3 of the closing costs?

cappyb13 · May 2009

When we sold our house, the buyer wanted all closing costs covered but we could not accept that at the given sale price. ?The buyer counter offered with a higher sales price and all closing costs. ?With the higher sales price, we were able to make a profit and they didn't have to have actual cash on hand. ?

Wassygirl · May 2009

its all a negotiation. it sounds like your realtor wants it added into the cost of the home because then she could collect a percentage. push back.

Janimal · May 2009

I would get a look at the contract you have with the seller. That should indicate the terms. The sale price of the home is the sale price of the home -- to raise it later is WAY fishy.

Lerxie · May 2009

Rach - was the "new" sale price + seller paid closing, a counter offer or is it written into your contract?

KristelRobin · May 2009

Rach03k:

kim1730:
I'm pretty sure what you described is having your closing costs rolled into your mortgage, which I've heard of before. But thats not the same thing as having the seller pay for your closing costs

Right exactly, and that's what I said to him. He was very clear that no, this was the seller's costs.

He tried to use a hypothetical example to explain it:

"Say you were a seller and you wanted to get $100k for your house, but the buyer wanted you to cover their closing costs. Well then you'd just raise the sale price to $103k, so that you still get the money you want for the house."

wtf. This is not right.

WTF is right. Do not go along with this, he is either lying to you or he is incompetent.

*blondiem* · May 2009

Are you positive he isn't raising the amount by the amount of YOUR portion of the closing costs??

*blondiem* · May 2009

cappyb13:
When we sold our house, the buyer wanted all closing costs covered but we could not accept that at the given sale price. The buyer counter offered with a higher sales price and all closing costs. With the higher sales price, we were able to make a profit and they didn't have to have actual cash on hand.

This also makes sense. We did this with our last home.

userdeleted · May 2009

*blondiem*:
Are you positive he isn't raising the amount by the amount of YOUR portion of the closing costs??

Yes, definitely not. In fact, that is what we wanted to happen in the first place, but he is very clear that this is the seller's costs and we are still responsible for our 1/3rd of the costs in cash at closing.

We definitely did not agree to this, and looking over the contract again it does not say anything about them being able to do this. I hope my REA calls me back soon.

jen_k2 · May 2009

*blondiem*:

cappyb13:
When we sold our house, the buyer wanted all closing costs covered but we could not accept that at the given sale price. The buyer counter offered with a higher sales price and all closing costs. With the higher sales price, we were able to make a profit and they didn't have to have actual cash on hand.

This also makes sense. We did this with our last home.

we did this for our buyers too!

Megan Briggs · May 2009

We had the seller cover out closing costs and it did not mean that the loan was increased. The seller tried to offer that during negotiations and we were like, "uh we're not asking for this because we want to finance the closing costs. We're asking this because we think the house is worth X plus $5k."

userdeleted · May 2009

Lerxie:
Rach - was the "new" sale price + seller paid closing, a counter offer or is it written into your contract?

Sorry, I'm not sure exactly what you're asking (and I'm feeling stupider and stupider as I think more about this whole thing!) but here is how it went down:

We offered: Asking price + they cover 100% of our closing costs

They countered: Asking price + approx 2/3rds of our closing costs

We accepted their counter, with the understanding that we would be rolling our closing costs into the loan

The contract only raised the sale price by our portion of the closing costs.

Okay after writing this down I feel a little more clear. I think our lender is very, very confused. And also an idiot for not listening to me.

happilyhis · May 2009

Rach03k:

kim1730:
I'm pretty sure what you described is having your closing costs rolled into your mortgage, which I've heard of before. But thats not the same thing as having the seller pay for your closing costs

Right exactly, and that's what I said to him. He was very clear that no, this was the seller's costs.

He tried to use a hypothetical example to explain it:

"Say you were a seller and you wanted to get $100k for your house, but the buyer wanted you to cover their closing costs. Well then you'd just raise the sale price to $103k, so that you still get the money you want for the house."

wtf. This is not right.

Actually it's fine as long as all he's raising is the "sale price" and not the amount of your mortgage. You need to take a look at your HUD sheet or your closing paperwork and make sure that the amount being added to your sale price is subsequently deducted under the section where the seller's costs are listed. It's almost like a balance sheet, showing what you bring to closing and what the seller brings to closing. The sale price doesn't matter as long as the amount you're financing doesn't change. For example, the sale price of our house was 201K, but we put 5K down and our lender paid 3k so our mortgage (what was financed) was only 193K.

janal · May 2009

A realtor would make next to nothing when adding the closing costs into the sale price, I highly doubt they would do that to intentionally make more money. (Each realtor gets 3% of the sale price, and has to split that with their company in some way; 1.5% or 2% of a couple grand isn't worth most of their reputations, IMO)

It sounds like they agreed to roll the closing costs into the loan, which apparently isn't how you wanted to do it. I would just clarify that you want to pay $X for the house, and the closing costs will be paid out of pocket, $X by the seller and $X by the buyer.

babywing · May 2009

I believe this is how our's went down. We asked them to cover the closing costs, they agreed. Our loan amount went up to include the closing costs. So if the offer was for $100k and closing costs were 10k, the final seeling price was $110k. However when we did the paperwork showing what we were paying what the seller was paying, the extra $10k came from them. So it would look something like this.

$100k       selling price
      + $10k closing costs
---
$110k price
     - $10k from seller
     - $10k from buyer (10% down example)
--
$90k final loan

THIS is what you need to look for I believe. The whole thing was very confusing and I was 9 months pregnant too. We actualy signed the papers the Sunday before I went into labor Monday night (2 weeks early). If you aren't 100% sure about something, ask, ask, ask again until you are. Don't feel bad, it's the biggest purchase you will make. HTH

userdeleted · May 2009

janal:
A realtor would make next to nothing when adding the closing costs into the sale price, I highly doubt they would do that to intentionally make more money. (Each realtor gets 3% of the sale price, and has to split that with their company in some way; 1.5% or 2% of a couple grand isn't worth most of their reputations, IMO)

It sounds like they agreed to roll the closing costs into the loan, which apparently isn't how you wanted to do it. I would just clarify that you want to pay $X for the house, and the closing costs will be paid out of pocket, $X by the seller and $X by the buyer.

Yes, I don't think it's our REA doing anything wrong, she is a really awesome person.

I think that somehow the wires got crossed with the lender and he is not understanding what is supposed to happen. Compound that with the fact that he is incapable of explaining anything to us - we are just really confused and I want to make sure I know exactly what is happening before I make anything permanent.

happilyhis · May 2009

babywing:

I believe this is how our's went down. We asked them to cover the closing costs, they agreed. Our loan amount went up to include the closing costs. So if the offer was for $100k and closing costs were 10k, the final seeling price was $110k. However when we did the paperwork showing what we were paying what the seller was paying, the extra $10k came from them. So it would look something like this.

$100k       selling price
      + $10k closing costs
---
$110k price
     - $10k from seller
     - $10k from buyer (10% down example)
--
$90k final loan

THIS is what you need to look for I believe. The whole thing was very confusing and I was 9 months pregnant too. We actualy signed the papers the Sunday before I went into labor Monday night (2 weeks early). If you aren't 100% sure about something, ask, ask, ask again until you are. Don't feel bad, it's the biggest purchase you will make. HTH

Yes. This, exactly.

Lucky_Dragonfly · May 2009

basically what happens is you can add your closing costs into the mortgage but the sellers still get the same amount of money. This what we did with our mortgage.

userdeleted · May 2009

babywing:
I believe this is how our's went down. We asked them to cover the closing costs, they agreed. Our loan amount went up to include the closing costs. So if the offer was for $100k and closing costs were 10k, the final seeling price was $110k. However when we did the paperwork showing what we were paying what the seller was paying, the extra $10k came from them. So it would look something like this.
$100k       selling price
      + $10k closing costs
---
$110k price
     - $10k from seller
     - $10k from buyer (10% down example)
--
$90k final loan
THIS is what you need to look for I believe. The whole thing was very confusing and I was 9 months pregnant too. We actualy signed the papers the Sunday before I went into labor Monday night (2 weeks early). If you aren't 100% sure about something, ask, ask, ask again until you are. Don't feel bad, it's the biggest purchase you will make. HTH

Okay this actually makes sense to me. Thank you so much for writing it all down

So the only thing that I'm still confused about is the fact that he was supposed to roll our closing costs into the loan. We should only be bringing our down payment to the table, but he has tacked on extra money and for some reason can't explain why to me. Hopefully my REA will be more helpful.

janal · May 2009

Rach03k:
janal:

A realtor would make next to nothing when adding the closing costs into the sale price, I highly doubt they would do that to intentionally make more money. (Each realtor gets 3% of the sale price, and has to split that with their company in some way; 1.5% or 2% of a couple grand isn't worth most of their reputations, IMO)

It sounds like they agreed to roll the closing costs into the loan, which apparently isn't how you wanted to do it. I would just clarify that you want to pay $X for the house, and the closing costs will be paid out of pocket, $X by the seller and $X by the buyer.

Yes, I don't think it's our REA doing anything wrong, she is a really awesome person.

I think that somehow the wires got crossed with the lender and he is not understanding what is supposed to happen. Compound that with the fact that he is incapable of explaining anything to us - we are just really confused and I want to make sure I know exactly what is happening before I make anything permanent.

Totally understand where you are coming from - the process is confusing! I work in financial services and actually used to write first-time buyer guides for a bank. A lot of times, they won't have the paperwork ready until the day before or day of, which makes it totally stressful if you aren't comfortable with how the process works. I bet it will all make sense when your Realtor walks you through it.

Congratulations, by the way!

divakat · May 2009

Eh, no, that would be rolling the costs into the price of the mortgage and YOU would be paying it. The whole point is that the seller is supposed to be paying it.

exhausted_bride · May 2009

I didn't read all the replies... there's a lot.
But we had all of our closing costs paid and didn't raise the price of the home. I have never heard of this.

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