One of the biggest challenges for home buyers – particularly first-time home buyers – is finding the funds for your down payment and your closing costs.
But take heart: There are credits from both sellers and lenders that may be available to you to help offset these costs.
Seller credits are often used to make people’s for-sale homes more attractive to buyers. The seller may list the home at a slightly higher price, but through a seller credit that reduces the amount needed at closing, he or she will differentiate the home from its competition.
As well, instead of making repairs on the property as requested by the buyers, the seller may offer a credit so the new owners will be able to do it themselves when and the way they want to.
Similar to seller credits, lender credits are used to encourage borrowers to select one lender’s mortgage over another’s. In exchange for slightly higher interest rates, lenders will credit borrowers toward their closing costs.
The credit can be applied to lender fees, such as origination fees, processing fees, and so on, but another great use of the lender credits is to cover tax escrows; this can result in significant savings.
Keep in mind the fact that neither seller nor lender credits can be used toward your down payment, as different mortgage programs, including both conventional and FHA programs, have minimum down-payment requirements.
These credits can save you money. To find out if you’re eligible, discuss it with your mortgage professional.