Can I Bring Less Money to Closing of Fannie SFH

Question

Doing my first deal, set to close January 25. In the future I'll get more creative, but going the safe route at first: Fannie Mae Investor Loan on SFH, 10% down, doing deal  through mortgage broker reccommended by Real Estate agent. Got the house for 31,000, and house should rent for 650-675. Here are the details of the transaction:
Purchase Price: $31,000
Estimated prepaid Items: $1,081.40
Estimated Closing Costs: $1,916.62
Total Costs: $33,998.02

Other Credits
Cash Deposit on Sales contract: $1,000.00

Loan Amount: $27,900.00

Cash from Borrower: $5,098.02

So, I put down $1,000.00 earnest money, and they're saying I'll have to bring $5,098.02 to close. So it's 6k out of pocket to get this 31k house. I'm wondering if there is a way to wrap up more of these cost into loan and bring less cash to deal in a fannie/freddie type situation? If so, is it too late to do it on this deal?

Don Hines · Answer

I got hardnosed about the "lock change" fee on my last Fannie Mae purchase. The first time it appeared was on the HUD 1. I already felt like they were chicken doo doo by telling me how much I could borrow. My closing attorney paid the lock fee so the deal would go through. That is the only thing close to a concession I have ever got from Fannie Mae.
Don

Lynn McGeein · Answer

Brad,  Maybe talk to a loan officer about current guidelines involving cash-out refi of investment property in today's market before you try to pay with a LOC with plans to cash-out refi.  While a few years back it may have been a great plan, I was shocked to learn that these days it seems the worst way to go, much higher interest rate and much lower cash-out.  This past September, I was told by a bank I do business with that I could get no more than 70% of appraised value and would have to pay 6 3/4% with huge points and fees to get a cash-out refi on an investment property, even though I could get an investment property loan with 25% down at 4.5% at the same time.    I also thought I read somewhere on here that you can only cash-out a percentage of the purchase price of the home instead of the appraisal price if it's a recent purchase, although that wasn't at issue so I didn't ask.   If the Homepath investor loan is only 10% down and 2% closing and probably 4.25% or less, I'd definitely be happy with that next time, too.  Only thing is you have to buy a Homepath property and those are hard to come by in my area, mostly snapped up by owner-occupants in the areas I want during the First Look phase.

Brad D. · Answer

Steve-don't know why they classified them as a 'cost' but copied right off the loan doc.

Dion - I believe Fannie doesn't contribute to closing costs on investor loans.

Bryan- I believe Fannie's Homepath doesn't allow for concessions for these investor homepath loans.

Again, the above is what I believe to be true based on what I've read and been told; if someone knows for sure this to be false please jump in.

Basically I've been doing a lot of reading on the Homepath and Efannie docs trying to do my own research, but could be wrong. I'm a newb and just trying to figure out if I'll have to bring this much to each deal for the next 3 after this (then more for 5-10).

For future deals, I'm definitely going to explore trying to get a bank LOC, then buy with that, then refi asap, which I think is 6 months.

Bryan Hancock · Answer

You can ask for a "deferred maintenance credit" in trade for a higher purchase price on the next deal.  That credit will be capped by the lender, but it will shave off some of the cash you need at closing.  Note that you have to be careful with this because it may signal weak financing to the seller and spark them to want a higher price.

Has the inspection already been done?  If so do you still have time to ask for concessions from the seller based on the inspection?

Dion DePaoli · Answer

If you have not closed you could ask for the seller to contribute toward closing costs.  You will be limited to a max of 3.0% I believe because it is an non-owner occupied property.  You will need to get the approval from the seller by getting it written up and alert you lender/broker to the same so they can update underwriting.  You might be able to review some of the fees charged by your broker and lender to see about a reduction.  At rough glance you seem like you got a pretty decent deal.  Outside of that "no" there is no other way to reduce what you have to pay at closing.

Steve L. · Answer

Prepaid items are not a "cost."

In the future you could have the seller pay your closing costs.  You could have the lender pay a portion of the closing costs.

That being said, I am used to paying 3+ points and 10%+ interest so you got off cheap.