FAQ – Closing Help

Brendan Spear Home Buying Tips Leave a Comment

Did you know that it may be possible for you to get help with closing costs when you’re buying your home? Want to know what that looks like? Let’s chat about it!

 

 

Closing Help

Let’s talk about how you can get some of those closing costs covered. Right, wouldn’t that be nice that if we could have somebody else help cover some of this money out of pocket at least. So, how does closing help work? Well, closing help is very simple. We ask the seller to give us some money. That’s all really it is, right?

 

So, I’ll give you the example that we talked about that $300,000 home. So, let’s say we say, hey mister seller, here’s $300,000. Please give me some money back to cover my closing costs. At $300,000, a lot of buyers are going to ask for 3% help. That 3% help is gonna cover the bulk of your closing costs, right? ‘Cause how much are the closing costs, do you remember? 4%, roughly. So, at 4%, if we get 3%, that covers, you know, 75% of it.

 

When you write an offer, you have to put some money down to say, “I’m serious. I want to buy a house.” Typically, that’s about 1%. So, one percent on the sales price is your earnest-money deposit, or your good faith where you say, I’m serious. I really want to buy a house. I’m not messing around. So, if we put 1%  down, and then we’re gonna ask for 3%,

 

3% Closing Help + 1% Earnest Money = 4% Closing Costs

 

And, there we go. That’s our closing costs, roughly. So, it’s a great way, is we just ask for it. That’s in the negotiations up front.

 

Couple Things to Bear in Mind

 

  1. Obviously, sellers don’t wanna give closing help, because that comes out of their money that they’re walking away with. So, you have to decide what your offer strategy is gonna be. If this even makes sense. If it’s a multiple-offer scenario, if you’re asking for bunch of closing help, that may make your position weaker. Okay, so it does depend on what you’re trying to do.
  2. Other things, just as a rule of thumb.
    • $350K and below, a lot of people ask for closing help;
    • The closer you get to $500K, people expect you to sort of have some of your own money. So, maybe you only get 1-2%; and,
    • Closer to $700K and up, people really don’t give closing help, as a general rule. Most of the negotiations are just in sales price.

 

That’s what closing help is. We’ll talk about the offer strategies in another post, but I hope that makes good sense. If you have any questions, please leave them in the comments below. Did you know that it’s possble to get help with closing costs? Are you closer to buying your first home than you thought? Let me know in the comments below!

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Brendan Spear