Bob Kutschbach, owner and broker of Carleton Realty, talks about lender funded closing costs.
Lender funded closing costs have been used for a long time but we don’t see them often used in today’s market. This situation arises when a buyer doesn’t have enough money for both the down payment and closing costs, and the seller is refusing to pay for the closing costs. In this situation, the buyer may not be able to afford to buy the house. The lender could raise the interest rate by a small amount. This way, when the lender sells the loan they can make a small profit and use that profit to fund the buyer’s closing costs. The lender is effectively building the cost into the loan. If the house is worth it and you really want the house this is a good technique.
Talk to your lender to see if they do lender funded closing costs. Real estate agents would do well to know which lenders do this too. This can save a deal where the seller will not pay closing costs for the buyer. For example: if the home’s appraisal comes in low, the seller may take a lower price but not pay the closing costs. We can turn to the lender for lender funded closing costs and this may solve the problem.
If you have questions about lender funded closing costs please contact one of our agents!