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Household Finances

Roll over closing cost along with mortgage loan

16 years ago

Hello, do banks allow the closing cost to be rolled over with the loan or do we need to pay upfront. I was planning to get a 95% loan of 213000, with 5% down, $11,000 and then pay $10,000 in closing cost.

However is it possible to have this $10,000 amount rolled over and take a total loan of 223,000. Has anyone had experience with this kind of roll over or is this usually done?

thanks,

T

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Comments (3)

Billl
16 years ago
5 years ago, you probably wouldn't have had much trouble finding someone to make a loan like that. You basically are looking for someone to make you a 222k loan on a 223k property - about 100% financing. The market for those type of loans has pretty much dried up with the housing crash. You might still find it, but expect to pay significantly more than you would for a conventional loan.

Also, if you haven't noticed, your plan worked out really poorly for many people who tried it. Housing prices go up and down, so if you have 100% financing, it doesn't take much of a swing for you to owe more money than the house is worth. It is a really quick way to bankrupt yourself.
sushipup1
16 years ago
If you are buying a home, find an experienced realtor who knows some good loan agents and start asking your question of the pros. Billl has some good points, and such loans are hard to find, but really, you don't need to ask here, you need to talk to the pros in your own neighborhood.
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Owning the land does help. However, another thing that goes into it is how long you have owned the land. Depending on how long you have owned it will determine whether you can use cost of the land or appraised value. The appraised value will determine how much you will have to put down. For example, if you just bought the land, the house as built appraises for 350k, and the actual cost to build is 250k, then you have 71% loan to value. However, because you have not owned the land long, they will go with the lower of purchase price or appraised value, so 250k + 37k = 287k which is 13% LTV and you would need to put ~21k more in to get to 80% LTV. BUT, if you have owned the land for a while, the house as built appraises for 315k, and the actual cost to build is 250k, then you have 80% loan to value and you would not need to put in anything more to get to 80% LTV. Finally, if it appraises for less - for example, it only appraises for 260k and costs 250k to build, then you are at 96% LTV and would need to put 42k more in to get to 80%. In this case it would not matter how much you paid for the land or how long you have owned it. I agree with calling around to a lot of different banks. US Bank might have a good loan program, however for our scenario, it was not the best deal out there. Some of the ones I found to be competitive included RBC Centura, Suntrust, BB&T, Wells Fargo, Fifth Third Bank, and some other banks that are very local to our area only. Janilyn, the builders that we interviewed were all able to bid based on plans we drew ourselves in 3D Home Architect / Chief Architect. None of them required any money upfront to bid on the job. Only after we narrowed down the field and then chose a builder did we have the final plans drawn by an architect. If you are choosing a builder model and making minor changes to it, I do not see why he would require money upfront. The appraiser may not necessarily need the final plans either. They can likely appraise with the builder model plans with your changes written in on them. Only once you go under contract with the builder, they often require a downpayment upfront. I would have the appraisal done first before handing over 6k nonrefundable.
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I didn't want to bore everyone with all the details, but the only way to get this house will be an all cash offer. This is an off-market sale; the seller is a licensed Realtor in my Realtor's office and is in a difficult personal situation that requires her to sell fast and quietly. The seller is already in contract with another buyer. The buyer has missed his date to remove his financing contingency. The seller is going to give the buyer Notice to Perform as soon as we have a signed backup contract. The lender has told the seller that the buyer's loan will come through by the end of this month (3 weeks) but the seller can't wait that long. If we have a financing contingency, even a 15-day one which my mortgage broker says is possible, we won't give the seller enough incentive to sell to us. Instead, she will put her house on the MLS and have an all-cash buyer within 3 or 4 days. That's how hot the market is where I live. She seems to be willing to do this. We'd lose the sale or have to come up with a higher price due to the bidding war that's likely to occur. Just for background on this zipcode, there have been 3 houses on the MLS in our target area of 20 square blocks in the past 2 months. We bid on the first one and lost out to a higher bidder - there were 5 bids. The 2nd one we didn't bid on - it also had 5 bids. The 3rd one we didn't bid on - it had 2 bids. All 3 houses sold at 3-8.5% over asking. Since this house is a lower price than the one we bid on last month, we're confident that the loan won't be a problem. We were pre-approved for the higher loan, and my mortgage broker has been working through the process since then to make sure everything's in place for a fast turnaround on a new loan.
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I will second (or third) the recommendation to go with someone local. First of all, it is a great idea to develop a relationship with such a person.... ours contacted us 9 months after our first refi to let us know rates were (significantly)even lower and it would be beneficial to refi again. Someone local will be interested in keeping their excellent local reputation, such on on Yelp, Nextdoor, and the local real estate agents, and with your neighbors, etc. They have an incentive therefor to be accomodating and honest, and helpful. Ask your friends and neighbors.
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Julie, Two different things. The town or government entity will do various inspections for code compliance. A third party, such as an appraiser, will verify that the work has been completed in order for the lender to disburse funds for the work. Don't confuse them.
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dave_donhoff
16 years ago
Hi T,

You could functionally get a loan orgainzed to fit your specified needs by going one of three routes;
FHA
VA
USDA

These are not hard to find, but how your loan is structured will matter a great deal. You'll want to shop for a properly skilled & experienced loan professional... it won't matter what company they work for (HOWEVER, you'll be better off, generally, with an originator that works for a brokerage, than a direct retail bank.)

Also, how much of the purchase price you actually borrow is NOT relevant to whether you have future financial troubles. What *IS* relevant is how much you keep in safety reserves ('rainy-day funds.')

IN GENERAL, and at the extremely-skinny very least, I would recommend that you figure out how much reserves you need to have on hand to equal no less than 6 months of your total living expenses (housing, food, transportation, entretainment, insurance... everything!)

*AFTER* you have set that money aside, not to be touched in your home purchase... *THEN* whatever remains is what you can safely use for your home purchase (and yes, then you can go to 100% financing, or "Zero Down" if you qualify.)

AGAIN... RESERVES RULES! Don't do anything until you can proceed with 6 months' total liveing reserves, and without touching them to get the deal done.

Hope that helps!
Dave Donhoff
Leverage Planner

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