We are seeing a paradigm shift, regarding Seller Paid Closing Costs in NC – that WE’VE never seen before. I’ve been in the Mortgage Business, in North Carolina since I was 15. If I say I’ve NEVER seen something before – it’s worth noting... even if you don’t want to buy or sell a home.
Because closing costs themselves are going higher in the summer of 2015, AND we now have many more Low Appraisals, we are quickly seeing the days of buyers funding their home with no out of pocket expenses vanishing. Seller Paid Closing Costs and no down payment opportunities are getting harder to make work for first time home buyers.
This is an important shift in the Real Estate Markets of North Carolina… In fact, we think it’s H-U-G-E!
Because First Time Home Buyers are the folks who NEED Seller paid closing costs.
If something happens, and the first time home buyer “population” can’t buy as many homes (because they now need a much bigger bag full of money to buy a house)… we know the wheels start to come off of the Real Estate / Economic Recovery wagon.
First Time Home Buyers create more or less a “trickle UP” effect in the housing market.
Seller Paid Closing Costs in NC 2015
Since the Mortgage Meltdown in 2008 / 2009 it’s been very common for Seller’s to pay most, if not all of a Buyer’s closing costs.
In many North Carolina Real Estate Markets in the Spring of 2015, having a Seller pay for closing costs means that you are going to have a LOW appraisal.
Being in a “Seller’s Market” means Sellers are accepting above “asking price” offers… once a home buyer adds closing costs to an inflated sales price, we are seeing H-U-G-E appraisal issues.
There are several things contributing to this shift in Seller Paid Closing Costs. However, as we shift to a “Seller’s Market,” we think this gap, in buyers having to pay more and more of their home buying closing costs, is only going to get larger.
- Fannie Mae rolled out a “new” Automated Appraisal service on April 1. The Service tries to verify that the Appraisers opinion of value is within certain ranges that the mortgage giant sees within properties it’s already financing. Being a “new” service, there are kinks that have not been worked out yet… and those kinks are suggesting that “lower” comparable sales priced units be used, which is contributing to lower appraisal values – across ALL price ranges. In the past week we had a $13,000 low appraisal, a $7,000 low appraisal and a $24,000 low appraisal. OUCH!
- Attorney Closing costs are expected to TRIPLE starting in August of 2015, as Dodd Frank requirements go into effect. The physical cost for the Attorney goes WAY up as they have to implement, among other things, over the top security systems for their offices. The Attorney’s we’ve talked to expect fees to go from $450 to $600 to more than $1250 in August. Somebody is going to have to pay those higher fees. If we are already seeing low appraisals, the Seller is not going to be ABLE to pay the additional Attorney fees.
- Additionally, the changes coming in August require that an attorney closing package be approved, at the Attorney’s office at least 5 days prior to closing. Meaning, you send the package on a Monday – you can close on Friday… this means that we will no longer be able to offer folks a 30 day lock for their mortgage. These extra “dead weight” days will simply mean that we will only offer 45 day lock ins. 45 day rate guarantees are more expensive than 30 rate locks. The borrower will pay a slightly higher rate, or higher fees to cover this extended time. Can a mortgage company simply do the loan ” faster” – no.
- Fannie Mae announced new “loan level price adjustments” (LLPAs) that go into effect starting in August. This has been reported as a “net neutral” adjustment in the media – no big deal for Fannie. HOWEVER, if you are a borrower making less than a 10% down payment, the cost of the mortgage will be higher… by another .5% or more.
- USDA Home Loan NC Requirements changed in December of 2014. With those tougher credit score requirements, many first time home buyers are now looking at the Down Payment Assistance program to help them buy their first home. MANY of the folks we talk to here in NC have good credit, they have good jobs… they just don’t have an extra $13,750 to make a 5% down payment on a $275,000 house. The Closing Costs for the NCHFA DAP program are HIGHER than the closing costs for a USDA Home Loan – by $2500 or more.
Again, there are still a FEW circumstances where a first time home buyer can get into a house with only a $1000 in cash… but those days are quickly ending. We strongly suggest that you budget more savings on hand when you are considering a house purchase this year.
It’s going to be down right difficult to make this “Dream Home Project” work if you don’t have a couple of thousand to help cover some of your closing costs.
What we are saying is that Home Prices in North Carolina are on a very upward trend. It’s a Seller’s Real Estate Market. Even if you negotiate Seller Paid Closing Costs, there will be LITTLE room in the negotiations for the Seller to pay ALL of the Closing Costs, and this will only get worse going through the summer – as the cost of a mortgage goes higher.
Can I Roll the closing costs into the mortgage?
There are ways, and times, when it makes sense for us (as the Lender) to pay some of your closing costs… however, on a purchase transaction we will not be “rolling in” closings costs to the mortgage.
This term literally refers to borrowing more than just the mortgage costs… while we can add items like the PMI on a FHA, VA or USDA loan – we can not loan you more money in order to cover the attorney fees and other costs involved in buying a house.
Again we, as the Lender, can Pay some of your closing costs! For instance, we generally do not quote our mortgage interest rates with an origination fee. We quote a zero point, zero origination fee mortgage rate to save you cash out of pocket. This means that you have a slightly higher interest rate, and we absorb the cost.
If the Seller is not going to negotiate the Closing Costs, or if there’s no room in the Appraised Value for the Seller to pay the closing costs, taking a higher mortgage rate, to cover some of the costs, might be another way to pay for closing costs.
The thing to remember is that you will need SOME cash to be able to close on your loan – very few people can buy a house with NO cost.
If you have questions about buying a home in North Carolina, or how to work out Seller Paid Closing Costs, please call Steve and Eleanor Thorne 919 649 5058, we do tons of First time home buyer loans, we understand all of the qualifying guidelines, and we’d love to help you buy your home in Raleigh, North Carolina!