What is a Buyer Credit at Close??

Should a buyer ask the seller for assistance on their closing expenses?

Image result for money pictureWhat the heck is a credit at closing for a buyer? When I ask a buyer when we are doing our buyer consultation if they would like a credit at closing when structuring an offer, they often look at me like I have 2 heads:) I thought it would be fitting to share so maybe if one of those buyers reads this they will feel like an empowered informed buyer and will look at me with confidence and say ‘Absolutely!’

Image result for money picture A credit at closing is when a buyer makes an offer and asks the seller to give them a credit at closing to go towards there closing costs and pre-paid expenses (homeowners insurance, building inspection, etc.). The credit reflects in the final executed contract if all parties to the contract agree.

The seller can’t just give a buyer money at close for anything. That would be nice, but is against lending rules. They can give a credit to help with the buyers closing cost expenses only. So if a buyer makes an offer for $300,000 & a $5000 credit at close that buyer is actually offering the seller a net of $295,000. This is important to understand because if making an offer in a competitive market, the price needs to be aggressive to take into consideration the buyer credit request since the seller’s net on sale price is less due to the credit. I would guesstimate more than 1/2 the offers we write have a buyer’s credit at closing included. Its a super common practice nowadays, especially in the St. Louis market where you have mid range pricing and buyers that need assistance.

Really that credit a buyer receives they pay back in the form of additional mortgage, but for many a credit is super helpful with allowing a buyer to be more liquid friendly at closing so they can have a greater down payment or fix-up money to make there new home a gem! The Buyer’s Agent will be the guide through this and help  determine the best coarse. Our experience shows it is best to figure out in initial stages.

Image result for shark jawsBuying a home is pricey and the expenses at closing are great. You have lender fees, title fees, inspections, escrows for taxes and insurance, and often additional realtor fee. Depending on the price of the property they can easily be $5000-$8000+! Ouch, that is a bite out of the old checkbook! So, if a seller is willing to help with the hefty costs costs by allowing a closing credit and the buyer has the need for it I would say that is a perfect real-estate marriage:)

I will give a little caution to any that care. If the closing costs do not meet the credit a buyer is getting sadly that negotiated money goes back to the seller. A buyers credit can only be used for closing costs and prepaids:( A buyer can’t walk away with money from the purchase they just made. Best practice we do is always confirm with the lender what credit amount should we ask for on behalf of the buyer. Then we are assured that no money is left on the table & we have a HAPPY New Homeowner:)


Happy St. Louis Home Buyer

Still Some Free Money (for Some)

home for sale in st louis moThe Missouri Housing Development Corporation (MHDC) has a tax credit that DIDN’T expire on April 30th and Funds are still plentiful! As reported in today’s Post Dispatch, the credit isn’t being used as much as expected. The credit is $1250 for the HOPE tax credit with an additional $500 for the HOPE Energy Credit, for a possible credit of $1750.

MHDC has been a source of assistance for home buyers for a long time (starting in about 1969). The type of assistance has varied. A few years back, they offered a program for first time home buyer downpayment assistance. This hears “HOPE Program” has taken the place of the down payment plans and has shifted the responsibility from the lenders directly to the home buyer or their accountants.

Information on the HOPE Program can be found online HERE. Anyone wanting to take advantage of this plan better hurry though. While it doesn’t expire on July 1st like the federal tax credit, this credit only applies for homes purchased before 8/31/ 2010 with the forms being due by September 30, 2010

Free Money

downpayment assistance

Free Money comes at a Cost

Last night a buyer called me about free money.  Very understandable.  Who could complain about free money?   Well, in reality, it may not be entirely free, and there could be a catch…..or two.

The Missouri adminsitration that handles most home buying assistance is called the Missouri Housing Development Commission, commonly known as MHDC.  Programs through MHDC range from rehabilitation loans and rebates to loans with downpayment assistance.   Timing is important if you’re interested in securing assistance from MHDC as most of their programs rely on the sale of bonds for funds.  The funds become available on a certain date and then expire when the funds are exhausted.  First come first serve. 

To look more closely into MHDC or any other home buyer program, contact an approved lender.  Make sure your lender is approved for the program in which they are giving information, as some lenders may try to avoid the subject or convince buyers that the program isn’t  useful if they aren’t able to participate.

Another entity in the St Louis are is Beyond Housing.  They also have a home buyer center that can assist low income buyers in achieving thier goal of home ownership. 

For all the Missouri associations providing assistance and education to St Louis home buyers, a list can be found at the US Department of Housing and Urban Development website

Happy Hunting!

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