03/19/2024
A real life example of a home listed in Covington:
🏠 This home is listed at $400,000 and they are offering $5,000 toward the buyers closing costs. You as a buyer, you want a deal.. something, anything. So let’s talk about the options.
A) You can ask the seller to reduce the price of the home by $5,000 instead of paying your closing costs which will give you a lower monthly payment by just a little bit.
😎 You can take what the seller is offering, $5,000 towards your closing costs, leaving you with more money in the bank.
C) You can ask the seller to pay $5,000 towards a rate buy down lower that already high interest rate.
So which is the right choice? Let’s look at those a little more in detail.
For these scenarios, let’s say the buyer puts 20% which leaves $320,000 for the loan amount at a 6.49% interest rate. This would make the monthly payment for principal and interest $2,020.51.
A) A home that is listed at $400,000 with a $5,000 price reduction would give you a New monthly payment of $1,995.26. This would save $25.25 a month and $5,097.00 interest for the life of the loan.
😎 A home purchase at $400,000 with $5,000 towards your closing costs will leave you with the same monthly payment first listed above but keep an extra $5,000 in your bank account.
C) A home purchase of $400,000 with $5,000 towards a rate buy down will lower the rate to 5.99%. Which makes the monthly payment $1,916.60. This will save $103.91 per month and $37,443 interest for the life of the loan.
💸 Option A - saves you $25.25 a month and $5,097.00 interest for the life of the loan.
💸 Option B - you don't save anything except the $5,000 you kept in the bank at closing.
💸 Option C - saves you $103.91 per month and $37,443 interest for the life of the loan.
$5,000 is $5,000 to the seller, so they usually do not care how it is used. But what you choose to do with it can greatly affect your mortgage payment each month and save you money over the life of your mortgage!
Right now, buyers have more negotiating power than they have had the last couple of years. Some sellers are offering concessions up front, others are open to offers including seller concessions. How to structure those concessions comes down to what best fits your needs. That’s where an experienced agent and a knowledgeable loan officer come into play to help you consider all your options and choose what is best for you
So if you are ready to buy, let’s go get creative and get you into your next home.
For this hypothetical example we assumed an interest rate of 6.49%. Obviously everyone's situation is going to be different. You should never assume a given interest rate until you talk to an actual licensed mortgage lender! I can connect you to an amazing mortgage lender here in Covington, just let me know if you'd like me to refer you.
This was copied from Julie’s page
