Can Closing Costs Be Added To A Home Loan

We work with many people who are qualified for a mortgage some where else (Rocket Mortgage for instance) but call us because they need help with the down payment or closing costs.  In most cases these days, Sellers are not willing to take a contract that requests closing cost be paid by them.  Because Sellers are able to get “top dollar” for their homes in NC (especially those homes under $400,000) the concern is whether or not the home will appraise.  Many of the folks who call us and ask:  Can Closing Costs Be Added To A Home Loan?

Why Would Closing Costs Create Appraisal Problems?

Let’s say you are looking for a house that costs $250,000.  The closing costs for that home could be in the range of $5000.  In most cases, the Seller would up the price of the home to $255,000 and pay the $5000.  If the true value of the home is $250,000 – the appraisal is going to reflect that.

When the appraisal comes in lower than the sales price, you can either re-negotiate with the Seller (who wants to do that, plus it can cause delays in closing), or you (as the buyer) can pay the extra $5000 – which defeats the purpose of having the Seller pay it.  There are so many people who are actively trying to downsize into this price range, Sellers just don’t want to hassle with having to figure that piece out.  READ:  In most parts of NC right now Sellers are not paying closing costs.

Can Closing Costs Be Added To A Home Loan?

The short answer is MAYBE.  There are some programs available to us that offer additional money for closing costs and down payment.  These are sometimes called mortgage grants, but in reality – you have to follow some rules in order to have the funds with no strings attached – plus NC Housing hates it when I use the “Grant” word.

The NC 1st Home Advantage Program is one of these tools that provides up to $8000 that can be used for down payment or closing costs.  “Similar to the other down payment assistance options available with the NC Home Advantage Mortgage™, this down payment help is a 0%, deferred second mortgage, which is forgiven 20% per year at the end of years 11-15, with complete forgiveness at the end of year 15.”

One of the beauties of this program is that it can be used with Veteran Home Loans, Fannie Mae Home Ready Program or a FHA Mortgage Loan.  Each of these loans offer opportunities for those with a minimum 640 credit score, and the income limits vary based upon the county you are buying in.

There are also 3% down payment assistance programs available and 5% down payment assistance programs from NCHFA.  Not all banks offer these programs, and we are happy that we know the ins and outs of the program so that we can help you determine which one will suit your situation best!  Because, with these programs, the answer to: Can Closing Costs Be Added To A Home Loan? IS YES!!

You apply for the down payment assistance at the time you apply for the mortgage.  Many people contact us and want to know if we can just do the down payment assistance, while they pursue a mortgage somewhere else.  The answer to that is no, you must apply for the mortgage and the down payment assistance together.  (We would love to help! Call us at 919 649 5058).  Quicken doesn’t offer these programs.

The income limits for the 3% program is based solely on the applicants “Qualifying” income.  If you are married (for instance) and your spouses income would put you over the limit, we would not put them on the application.  For the $8000 program, we count the income based upon HOUSEHOLD income, meaning anyone who is over 18 years old living in the home will be considered towards the income limit, even if they are not on the loan.

What are Closing Costs for a Mortgage?

The number of different charges involved in buying a home is mind-boggling – and it is important to know what to expect at the settlement.   Although as your lender we are required to give you a Loan Estimate (LE) of your settlement costs, comparing those costs with other lenders can sometimes be difficult. For that reason we ask to see the other LEs you receive to ensure that you are comparing “apples to apples.”

We recently reviewed a Loan Estimate of Closing Costs from another Lender, here in Raleigh, and they had a charge of $875 for a Survey on a Conventional Loan for a house near North Hills that was built more than 30 years ago.  The reason we mention it is because the Bank doesn’t require a Survey.  You would want one if you are trying to put up a fence, or have a question about expanding a deck or bedroom and are concerned about being too close to the line?  But as a rule – we don’t show them on a list of items you need to budget for.

In general, we see closings costs on an average First Time Home Buyer Loan at near or around $5000.  The exact numbers are based upon your taxes, your homeowner association dues, and even the deductible you choose from your homeowner’s insurance policy.

If you are looking for a No Closing Costs Savings scenario, we can do that too. We do not add the costs to the mortgage amount… with a No Closing Cost mortgage you are paying a higher mortgage rate.  There are many people who prefer this option over a Mortgage Down Payment Assistance Program – either way,  you will not be getting the best mortgage rates.  If you are looking for a Construction Permanent Loan, we can help you save money on Closing Costs here too!

If you want more information about Can Closing Costs Be Added To A Home Loan – please call Steve and Eleanor Thorne, 919-649-5058.  We are Mortgage Lenders in NC  – and we specialize in First Time Home Buyer Loans / First Time Home Buyer programs across our great State!