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December 9, 2022

Closing Costs

Every new loan includes closing costs which must be paid at closing. These are calculated on a mortgage officer’s calculation system. These costs are fees such as origination fees, appraisal fees, and many other fees. 

How to Use Seller Credits to Pay for Loan Closing Costs

Fees associated with closing costs can be paid in a variety of ways. Cash is the first option and a frequent choice. There are other options, however, such as Seller Credits (Seller Concessions.) When a home buyer uses seller credits, they negotiate in their contract that at closing, the seller will give them a credit in the purchase. As an example, if a seller lists a house at $500,000, and offers Seller Concessions of $12,000, when the home closes, the buyer gets a $12,000 credit. Seller Credits can be used to pay down the closing costs.

How to Use Seller Credits to Lower Interest Rate

Seller credits can also be used to lower the loan interest rate. To lower an interest rate, a borrower must pay a “Buy Down.” Buying down the interest rate means that a borrower puts money down, according to a chart, to lower the interest rate on a loan.

How to Use Lender Credits to pay for Loan Closing Costs – Yield Spread

Yield Spread is the amount of compensation that exceeds a broker’s compensation package. Yield Spread must be paid back to the consumer borrowing money. Lender Credits are the opposite of Buy Down points. If a borrower increases their interest rate, then the yield spread can be used to cover the loan closing costs.

How to Use Home Equity to Pay for Closing Costs

When a borrower refinances a property, home equity can also be used to pay for closing costs. During a refinance, an appraisal will determine the current value of the home. Any of the equity in the home after receiving the appraisal can be used to pay closing costs.

There are many ways to structure a loan and your mortgage broker is the best person to speak with in determining what option may be best for you. Remember that whatever your situation, there’s a Juicy Solution waiting for you. Take a peak around the website at many blogs posts and other resources to learn what mortgage options may help your situation. If you have any questions, please contact us and we would love to create a blog video on your question!

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