Really stupid and confusing question about closing costs?

Question

My realtor explained this to me and my husband and I realize we're way more confused about it now. So if a seller agrees to cover closing costs, and let's say a house goes for 200k and closing costs are 5k, the realtor says the seller would get 200k in payment from the bank but 5k would automatically go back to us to cover the closing costs. However, the cost of the house is still 200k, not 195k, and the 5k in closing costs are apparently just rolled into the loan and we pay it off over time w/ the mortgage, so how in the world did that 5k go to us...it didn't from what we can see? And the seller lost them too in their payout so...WHO GETS THE 5k in closing costs? We are so confused, if we're still paying for them in our loan, how is the seller covering closing costs at all? Don't worry, we aren't buying a house yet, just trying to get the preliminary stuff down first.

Answer 1

The closing costs don't go to you or the seller at all, they primarily go to the lender who is providing the loan. You pay $200K total for the house. The seller receives $195K. The lender - and the title company, and various other suppliers - receive the $5000. But you would have had to pay the $5000, plus the $200K if the seller had not agreed to pay the $5000. This is usually done as a credit to you at closing.



Rolling your closing costs into your loan is a separate concept. Usually the lender will charge a higher interest rate, in which they get a credit from the investor, which covers your loan costs. This is more expensive in the long run, but buyers don't always understand that.



Your Realtor can help you structure the sales contract either way, or you could simply plan on paying your own closing costs. Discuss this further with the Realtor and also your loan officer. The two of them need to talk also, so your Realtor knows how best to structure your offer.

Answer 2

We got a house for 105. That's the max that we could pay. And we had no money for closing costs. So the offer was for 198. The seller agreed to receive 198. The 7 k in closing costs is part of what we paid but not to the seller. If we had an extra 7 k then we could have paid that and the seller would get all of 105. But no Angel really came down from heaven to give us 7 k. So the seller had to be ok with 198. But we are the ones who paid it. And the sellers are the ones who didn't get It. So it's a double edged sword thingy.

Answer 3

Normally the cost of your mortgage loan is not considered closing cost and you would pay for the cost of your mortgage loam.This is the reason the cost of your loan is rolled into your mortgage loan



If your idea is not to pay for the loan points and fees out of pocket this it the procedure used. When using this feature, your interest rate would be increased to cover the cost of rolling teh cost of your loon into the loan amount.



Your closing cost would be taxes, escrow and closing cost, title fee cost, insurance,any transfer fees charged by the title company or county assessor office.



This would be the closing cost paid for by the $5k. Normally your sale contract would indicate the seller would pay closing cost not to exceed a certain dollar amount.



You would need to have the closing agent go over the figures with you for a better explanation. There are many real estate agents that would have a problem explaining a HUD-1 closing statement.



The closing agent would not be able to change or alter the figures, but would have a firmer grasp of the cost and who would pay and the amount paid.



Both the buyer and seller would receive a HUD-1 closing statement.Each closing statement would be different.



I hope this has been of some benefit to you, good luck.



"FIGHT ON"

Answer 4

Your question doesn't make any sense.



Say the house is $200,000

You are paying a 5% downpayment; making the amount of the loan $190,000.

Closing costs are $5000 and will be paid by the seller.



If you were paying your own closing costs, you would have to pay $15,000 at the time the final loan documents are signed = $10K down + $5K closing.

Instead you are only going to have to pay $10K for the down and $0 for closing.



That said = is the seller paying closing costs even an option in your area? The only places that it is, is when it's a buyers market.

Answer 5

You better hire a different realtor. That one should not have a license to sell.

House sells for $200,000. Seller agrees to pay $5000." towards" closing costs.

No one can predetermine exactly what closing costs will be until both lawyers

have all the paperwork ready. You, the buyer pay $200,000. for the house. Keep

in mind there are closing costs for the seller and the buyer. The closing costs

consist of numerous items. Such as, lawyer's fees, registration, prorated property

taxes, legal searches, possible land transfer tax, deed preparation, title insurance,

and others. The seller and the buyer will each be presented with the costs for each

of their sale and purchase. The seller will pay for their own costs,plus $5000.

toward the buyer's costs and the buyers will pay for any remaining amount of their

own costs. You can now understand how you DO have $5000. paid by the seller

towards your closing costs. You pay any remaining amount.

Answer 6

The $5k gets deducted at closing. It's not a reduction in the price of the home.



If your agent is insisting that you are still paying them via the loan, you need to get clarification from the lender and the agent.



I have seen cases where the seller will cut a $5k check for closing costs as a separate transaction. Just make sure it's all in writing.

Answer 7

I used to represent 0 down buyers all the time, I get this, The house may sell for $200k, but he seller only nets $195k after paying your $5k in closing. Plus if the original list price was $200k you are only asking for a 2.5% discount. Essentially you are giving the seller the funds to pay for your closing costs and wrapping up the costs into your original mortgage. If you had the closing costs you offer would be equal to offering $195k for the $200k house.

Answer 8

if you are using an escrow, there are two statements, one for the buyer and one for the seller

if the seller has agreed to use pay the $5K in closing costs that is shown on his statement and reduces the amount that he actually receives

your statement shows that none of the closing costs are even listed on your statement

the closing costs are applied to the title search, the tax stamps that are required etc which normally you as the buyer pay

if the seller has a mortgage that also will be paid off in his statement showing that lien is satisfied and the property is clear to be sold

Answer 9

You answered yourself. Without the closing costs, your loan is $200k and you owe closing costs. With the seller covering closing costs. Your loan is $195k and you still pay the closing costs up front.



A: $200k + 5k = $205k

B: $195k + 5k = $200k



A - B = $5k paid to you.

Answer 10

In the standard contracts we use in Texas it spells out what closing costs are. Mostly costs that the mortgage company is charging you. If the seller did not pay them then you would pay them in addition to the $200,000 cost of the house.

Answer 11

if the seller agreed to pay $5,000 of your closing costs the seller would receive $195,000 (less other costs) and you would receive a $5,000 credit for your closing costs. The $5,000 is not rolled into your loan.

Answer 12

it works this way for the seller



200,000 sales price

(-) 12,000 est realtor fee

(-) 2,000 est seller closing costs

(-) 5,000 closing cost credit to buyer

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$183,000 to seller (from this they also have to pay off their current loan (if any)



For the buyer, it works this way



$200,000 sales price

(+) 5,000 closing costs (could be more)

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$205,000 total needed from buyer

(-) 5,000 credit of closing paid by seller

(-) 192,000 loan from buyer's lender. This number is est

(-) 1,000 earnest deposit. EST

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7,000 need from buyer at the settlement table

Answer 13

That is not correct. If the seller covers it, you pay $200K, and the $5K comes out of seller end before they get anything. Your realtor isn't' very bright.