If you are considering buying a home in 2013, you will want to make certain that your Realtor negotiates the best price and terms for you so that you do not leave any “money on the table!”
The process of asking a seller to assist the home purchaser with their closing costs and prepaid items has become very common in real estate transactions over the last decade.
This popularity of this practice increased as the options for 100 percent fi nancing declined since 2008. Most every purchase loan requires a down payment from the buyer.
The required down payments start at 3.5 percent of the purchase price with an FHA loan and increase from there. Therefore most buyers must bring money to closing for their required down payment.
At the same time, there are costs associated with procuring most home loans. Common items include: loan origination fee, document preparation fees, processing fees and taxes on the sale of the property. There are also costs which are paid in advance such as homeowner’s insurance, taxes on the sale and monies to set up a borrowers escrow accounts. All of these costs/expenses are commonly termed closing costs and prepaid items. It is common for these expenses to total 3-4 percent of the price on an average home in Chattanooga.
When faced with these combined costs, many buyers ask the seller to assist them with these expenses, by providing a credit on the settlement statement to offset the costs. In this way the buyer brings fewer monies to the closing table. This amount is negotiated into the purchase contract and agreed to by both parties at the onset of the transaction.
The phrase “leaving money on the table” arises when a buyer negotiates an amount in closing costs assistance from a seller; the expenses associated with the loan are lower than this amount and the buyer does not receive full benefi t of the closing cost allowance.
The key to avoiding this situation is found in the Dodd-Frank Act which was signed into law in July 2010. One of the features of this wide ranging act was the requirement that borrowers receive a good faith estimate of their closing costs in advance of the loan.