Closing costs are typically thousands of dollars, and buyers often have trouble coming up with that kind of money, plus a down payment and other expenses. If you’re planning to buy a house and feeling stretched financially, the seller might be willing to cover some or all of your closing costs.
What Does It Mean When a Seller Pays the Buyer’s Closing Costs?
If a seller pays your closing costs, the seller will cover those expenses now, but you’ll have to pay them later. The closing costs will be added to the house’s purchase price.
That means the amount you’ll have to borrow, your monthly mortgage payments, and the total you’ll pay in interest over the life of the loan will increase. If you want to put down 20% to avoid paying for private mortgage insurance, your down payment will increase, as well.
The amount a seller is permitted to contribute to a buyer’s closing costs varies by loan type and location. If the seller raises the price to include closing costs, the house will have to appraise for that amount.
Why Might You Ask the Seller to Pay Your Closing Costs?
Having the seller cover your closing costs can reduce the amount you’ll have to pay up front. If the house needs repairs, you’ll have to buy furniture or appliances, or you don’t want to wipe out your savings account and have no money left in an emergency fund, having the seller cover your closing costs can make sense.
Why Might the Seller Be Willing to Pay Your Closing Costs?
Covering the buyer’s closing costs can help a homeowner sell a house faster. If the seller is eager to move into a new home or escape high mortgage payments, the seller may agree to pay your closing costs.
A home inspection might uncover one or more defects that require repairs. If the seller doesn’t want to make repairs before closing, the seller might instead be willing to pay your closing costs.
How Can You Make Your Offer Attractive to the Seller?
A seller who pays some or all of the buyer’s closing costs is doing a favor for the buyer. If you want the seller to agree to your request, make your offer appealing in other ways. For example, offering the list price or being willing to close quickly can make your bid more attractive than one from another buyer, even if you ask the seller to cover your closing costs and the other potential buyer doesn’t.
Local conditions can be important. A seller will be more likely to agree to your request to pay closing costs if you’re purchasing a house in a buyer’s market.
The seller might be willing to pay for all of your closing costs, or just a portion. Figure out what you really want or need. Having the seller cover some of your closing costs might leave you with enough money in the bank to feel comfortable going ahead with a purchase.
