Financing closing costs

Here's my two cents: if you can't cover closing costs, then I think you need to seriously reconsider whether you are truly in a financial position to purchase the condo. You are cutting it awfully close to the bone if you won't even have money left afterward in case something unexpected comes up in your life. Are you sure this is a wise move? Especially in this downward market--if finances are so tight, why purchase right now?

I'm going to agree mostly with kylewest, but, ASSUMING that you have factored in that everything for the home costs double (or triple) what you would have guessed before you own it...you CAN get your closing costs as a gift - nobody checks it, but make sure the money is free and clear in your account well before closing - banks will look at your resources inclusive of closing costs paid for when determining how much to lend you.

under $500K, you'll need probably about 15K for cc...or the other way I've heard is anywhere from 2-3.5% of the home

i would doubt that a bank will provide a mortgage for a person who is coming in spending their last penny and then some.

All: Thanks for the input. kylewest: i hear you loud and clear. I am considering a purchase of a relatively new development and negotiated a price very similar to what the current owner paid (< $1MM). More on point, i love the apartment and building. It has great amenities, excellent location. I need a place to live. In short, it fits my personal situation. I have only been working for a few years (part of the reason I havent saved enough to cover the full transaction), but have secure and comfortable income to cover any mortgage payements and carrying costs.

You're making an awful lot of assumptions about the person...they didn't ask for your opinion on whether they should be buying the place

Hey, Boo, I have to disagree; isn't this how we got into this mess in the first place, spending every dime & then some & just KNOWING that tomorrow will be rosey, rosey, rosey. Keep saving your money, kim, & watching the market & hopefully in a year or 18 months you'll be in better shape financially. Look around at all the people who, sadly, are on Queer Street & don't create that for yourself.

Just read this thread again...how do you know he isn't sitting on a massive trust that will pay him income for the rest of his life? How do you know his parents aren't foreign and they CAN explicitly afford the place but they have to get it to him and but he has to stand on his own credit rating?

You aren't your brother's keeper and this person isn't even your brother. You're assuming he's spending his last dime. I'm not.

There's such a thing as a seller's concession where the bank allows the seller to pay up to 6% of the closing costs.

I have more information on this: wwww.esfunding.instantlender.com

As far as gifts go, no more than 5% of the down payment is allowed. Banks will check your bank statements going back to three months.

"As far as gifts go, no more than 5% of the down payment is allowed. Banks will check your bank statements going back to three months."

That is definitely not true - I have a close friend whose parents gifted her over 50% of the downpayment costs and who managed to secure a mortgage. The bank only requested a gift letter be signed confirming that the money was a gift and not a loan

Maybe that bank did not sell their loan to Fannie. But these are Fannie guidelines; go to the Fannie website and you will see it.

Not true that no more than 5% can be gift funds. For conforming loans, if the gift is 20% or more than the borrower does not even have to have their own funds. But in most cases, as long as the borrower is putting 5% of their own funds in then the rest can be gift. It just has to be sourced as far as where its coming from and confirmed that it is a gift. sunny.hong@bankofamerica.com

Boo, I think you are over-reacting here. Sometimes a questioner has not considered factors that may weigh significantly in understanding the answer or the question reveals such a fundamental underlying issue that it needs to be addressed. If you go to the doctor for a rash but the doctor sees you have jaundice, the doctor doesn't ignore the latter because you only asked about the rash.

Here, the OP didn't say s/he'd "prefer" to cover closing costs out of a loan. The OP clearly stated the OP couldn't pay closing costs without additional funds. That is a yellow flag. It is something to consider carefully. The OP has gone on to say s/he is new to the work force which implies relative youthfulness to me. As you grow older, you come to realize things rarely play out as planned and having depth to one's backup plans is important in life. My point, as I think the OP appreciated given the second response, was to be certain to have built in all sorts of contingencies before buying into this RE market as a first time homeowner.

Not all of us are surrounded by parents, friends, and colleagues who are sophisticated in finances and transactions of this magnitude. Counseling caution is a good thing--not something to be criticized. The counsel can be ignored, considered, or deemed unnecessary by the one receiving it. But it isn't wrong to offer it, and I think your approach is overly technical and doesn't serve the OP or the educational function of these forums.

shong, show me where the fannie mae guidelines says that. Thanks.

kyle,

I agree with your assessment of the situation, and said so, but the reason people come here is to have their questions, usually very specific ones, answered.

Unfortunately, I think it's become much the norm around here to engage in big-brotherhood where it's not necessarily warranted. When I first joined SE and asked about trends people were seeing in small units (Sub <$400k), instead of getting answers for my questions, I was given attitude by: 1) a broker who essentially snickered at me and told me to come back to the market when I had more money, 2) people who warned me not to be buying a place because my boyfriend would be living in it, and when it was finally wrung out of me that I have no constraints with respect to financial resources for the purchase, was essentially grudgingly given a pass...but my question was never really answered.

Back to the OP: reading between the lines, someone who is new to the work force does not, on their own horsepower, have enough $$ saved up to buy a new development, even if it is ">$1 Million", and chances are, if they can get a gift on the closing costs, somebody out there is helping them. There's no reason that should incite a ton of sass from people making assumptions. I don't mean you, at all, but comments like "spending every last penny and then some" help no one. Save the shout downs for the trolls, not the people looking for real answers.

whoops. reversed the "<" sign. You know what I mean.

streetsmart, Im going by what our guidelines state at bofa. Dont you follow guidelines from banks you broker to and not what fannie mae says? But as long as I remember, more than 5% gift funds were never a problem.