Daughter buying her 1st home w/ VA need help with closing cost

27 Replies

@Crencenthia Brown if she doesn’t have money for closing costs that like means she may not he financially ready to buy a home.

Also you can gift her the funds yourself. That would probably be the easiest way

Originally posted by @Caleb Heimsoth :

@Crencenthia Brown if she doesn’t have money for closing costs that like means she may not he financially ready to buy a home.

Also you can gift her the funds yourself. That would probably be the easiest way

 Yep.  The program she needs is Dave Ramsey's Total Money Makeover where one learns to budget, prioritize spending, sacrifice and strive for excellence. 👍

@Crencenthia Brown

I recently sold a rental house to a vet who used a VA loan. As you probably know the VA permits $0 down payment loans, but the Buyer does need to have some money for closing costs. In my case, the Buyer did not have any money for a down payment, so he negotiated to have me (the Seller) pay for all the closing costs.

We agreed on a sale price for the house = $203k, but included $6k of Seller-paid closing costs. So the Buyer took out a loan for $203k, while I netted $203k -$6k = $197k before then subtracting my other selling costs (e.g. agent commissions, title insurance, etc).

The challenge in this approach is to make sure that the house will appraise for at least the selling price or more, as the VA is not going to lend you more money than the house is worth.

Originally posted by @Crencenthia Brown :

My daughter is buying her 1st home and she using her VA loan. Her issue is closing cost. I'm trying to find program that maybe able to help her . Thanks for the advice 💜💚


A VA loan should be able to roll the closing costs into the loan. the whole idea is zero dollars out of pocket.


 

@Crencenthia Brown the lender or a combination of lender, sellers, realtors can all pay for her closing costs. Did you know that the lender can also payoff some debts on her behalf at closing? 

It depends on the lender and rates, of course, but it is an option for the VA loan - only.


Thank your daughter for her service and talk to a lender that will help her, responsibly, become a home owner. 

Originally posted by @Eric C. :
Originally posted by @Crencenthia Brown:

My daughter is buying her 1st home and she using her VA loan. Her issue is closing cost. I'm trying to find program that maybe able to help her . Thanks for the advice 💜💚

A VA loan should be able to roll the closing costs into the loan. the whole idea is zero dollars out of pocket.

Unfortunately, this is incorrect. When you buy a home, there's three buckets to consider, especially, when you are financing the property. It doesn't matter whether VA, conventional or FHA. They all operate the same.

Bucket 1 is the down payment 

Bucket 2 is the closing costs 

Bucket 3 is the escrow/prepaids for taxes and insurance 


The first bucket is your required minimum investment/"skin in the loan". This can come from your own funds, gift if permitted, or down payment assistance if it's your primary home. For a VA loan, true, that means it's zero down, so this is covered. For other loans, they may have a minimum down payment of 3%-3.50%, if a primary home.

But the two other buckets must covered. They are not rolled into the loan. These latter buckets are negotiable and can sometimes be paid by an interested party in the transaction such as the seller, combination of lender, realtor, and seller. 

The only 100% loan that can sometimes* roll in closing costs and prepaids into a loan is a USDA Rural loan, and even that sometimes still needs the buyer to come up with some funds as the cap above and beyond the 100% financing is 2% . 


*-only if the appraisal comes in higher that the sales price.


 

I understand the desire for home ownership and VA loans can help with that. However, echoing others, I think she needs to save up some funds before moving on this. What happens when the furnace goes out a month after purchase? If she can't even afford the relatively small VA loan closing costs, she's not financially ready for owning a home.

Originally posted by @Andrew Postell :

@Crencenthia Brown you local lender should know of down payment assistant programs.  Was she prequalified with a local lender?

 @Andrew Postell  forgive me I'm still learning how to use BP. Actually I didn't give you'll enough information. Yes she has pre-qualified. I believe around 270, she doesn't want to go that high. She's looking at homes 180 being her highest. Now she was in the Army for 6 years. She was able to save a very nice penny.  Meaning that closing cost can be almost 5000 or more. She's trying to hold on to some of her funds to help with her moving cost. The realtor she's working with said he's going to look into something's for her. I just wanted to ask BP to see what you guys have to say. Also we are located in Durham NC. Thank you and I hope you understand what im trying to say..

Originally posted by @Caleb Heimsoth :

@Crencenthia Brown if she doesn’t have money for closing costs that like means she may not he financially ready to buy a home.

Also you can gift her the funds yourself. That would probably be the easiest way

 @Caleb Heimsoth thank you for answering my posts. I must say I can agree with you on that. But I also believe she's ready. My daughter was in the Army almost for 6 years. She save up alot of her money. She can but up some of the closing cost. She just wanted to hold on to some of her savings. Also their lots of people that's buying homes and don't have the closing costs. They apply to theses programs for help. Her realtor did say he knows of some programs that may can help. I want to ask BP to get more ideas and opinions. She did get pre-qualified for almost 280 but she didn't want to go that high. I was really surprised at that. Her high is 180 she hoping for 170. So far the realtor is doing good job. We live Durham NC.  I'm sorry if I wasn't clear enough on my post. I'm very new to BP. Again thank you for taking the time out to answer me.

Originally po Isted by @Steve Vaughan :
Originally posted by @Caleb Heimsoth:

@Crencenthia Brown if she doesn’t have money for closing costs that like means she may not he financially ready to buy a home.

Also you can gift her the funds yourself. That would probably be the easiest way

 Yep.  The program she needs is Dave Ramsey's Total Money Makeover where one learns to budget, prioritize spending, sacrifice and strive for excellence. 👍

 Thank you for your response. I must say shes very good with her monies. Better than I was at her age. She was in the Army for almost six yrs. She saved up. She was watched every penny she spend. Now I asked because she wanted to save some of her funds for her moving cost. She was told there are programs that do help with some of the closing cost as long she can put towards it too. I  figured let me ask BP to see what you all my know. I'm new to this myself so of I can get help with others that know more why not ask. I'm not understanding why isn't someone asking with help with closing costs means that they can't afford buying a house. Isn't it the idea not to always use your own money but to use someone else money if possible? She pre-qualified 200000 but didn't want to go that high. Her highest 180 but if she can get lower she will. Also she worked very hard to make sure her credit sore stays is the high 700. The lender was surprised that is was that high at her age. 

but I totally understand what you are saying. Thank you

Originally posted by @John Teachout :

I understand the desire for home ownership and VA loans can help with that. However, echoing others, I think she needs to save up some funds before moving on this. What happens when the furnace goes out a month after purchase? If she can't even afford the relatively small VA loan closing costs, she's not financially ready for owning a home.

 Ok, maybe I didn't explain well enough. Let me try it this way. The realtor said the closing costs can be as high 6500. She was pre qualify for over 200000, she not going that high. Because she want to keep her mortgage payments below 1000. My daughter was in the army for almost 6 yrs and saved better than I ever could have done. I asked this question because a few people told her about programs that my be able to help with the closing costs. Her realtor did say he's going to look into something things to help her save some money. That she can use for moving cost. Also the loan bank wanted her to show at least 3 to 6 months of savings. But why if someone want help with closing costs, means that they can't or shouldn't but a home. If that the case way are there programs to help with it?  Maybe I didn't word my question right or something. Also what is little closing cost to you? Thank you again  


Originally posted by @John Teachout :

I understand the desire for home ownership and VA loans can help with that. However, echoing others, I think she needs to save up some funds before moving on this. What happens when the furnace goes out a month after purchase? If she can't even afford the relatively small VA loan closing costs, she's not financially ready for owning a home.

 Ok, maybe I didn't explain well enough. Let me try it this way. The realtor said the closing costs can be as high 6500. She was pre qualify for over 200000, she not going that high. Because she want to keep her mortgage payments below 1000. My daughter was in the army for almost 6 yrs and saved better than I ever could have done. I asked this question because a few people told her about programs that my be able to help with the closing costs. Her realtor did say he's going to look into something things to help her save some money. That she can use for moving cost. Also the loan bank wanted her to show at least 3 to 6 months of savings. But why if someone want help with closing costs, means that they can't or shouldn't but a home. If that the case way are there programs to help with it?  Maybe I didn't word my question right or something. Also what is little closing cost to you? Thank you again  

Originally posted by @Micheal Patterson :

@Crencenthia Brown

Your daughter can roll her closing costs into the loan and have absolutely zero money down. I have purchased 2 homes now with a VA loan and put zero money down. Hope this helps.

 Yes! It does help a lot. I will make sure to pass this information on. I'm not understanding why others are saying if she can't afford closing costs she shouldn't buy a house and she should learn how to.save. my daughter served 6 yrs in the Army and let me say this girl saved most of her tax's return and each time she was paid she had money coming out of her check. Her  credit score is better than mines. She almost in the high 700 almost 800. Even though she was pre qualified for over 200000 she staying low nothing higher then 180 but she said 175 is much better. Without me even saying anything. Even the loan company was surprised on her score and her savings. Again thank you for answering my question. 

@Crencenthia Brown

Get 6% concession s from the seller.

Keep one thing in mind, the VA will assess a funding fee ( mine was 14k)

They roll it into the loan. I didn’t know this until I was ready to close.

FHA is very good too, you may not get the same interest as the VA loan, but it's pretty close.

But If basic closing cost are a barrier then the additional 3% down payment required by FHA would probably be a burden as well. With the VA

You can fund a 100% of the loan.

Lean on the seller for concessions, you will need to negotiate that with the seller. In most cases, you will add 6% to price of the home and receive the credit towards closing.

Ex: purchase price 100k

Add 6% to acquisition

New purchase price is 106k. 6k is credited towards closing.

You can try to negotiate that the seller contribute a portion of it so you don’t have add 6% to the acquisition ( may be 3% and the owner comes down by 3%)

You still get the max concession (6%)

@Crencenthia Brown you have some pointers above....some correct and some not so correct....but my main point here is - why isn't your lender suggesting these things to you?

  • There should be local, downpayment assistance programs (some call them "first time homebuyer" programs....but most don't require you to be buying your first home) that can help with and even pay ALL closing costs.
  • The lender can "premium price" the loan.  Meaning, they can actually trade a little bit of the interest rate for paying for your daughter's closing costs.
  • The seller can contribute up to 4% of the loan amount to help pay for closing costs. That is the VA limit but that should a pretty considerable amount.
  • And you can even use a combination of these items to make sure you need $0 for closing costs.

Now, even if she needs $0 for closing costs.....she will still need about $2,000 just to get her offer accepted - Earnest Money, Option Money, Inspection Money, etc.

My main point here is....if your LENDER has not already shared this information with you and your daughter - then you need to find a different lender. These are HUGE red flags for me. A very entry level, low experience person should know that information above and should have been able to advise her already on those options. VA Loans are harder to close from the lending side than other loans. If your current lender doesn't know that basic information above then you will be in for a rough ride using them.

Originally posted by @Andrew Postell :

@Crencenthia Brown you have some pointers above....some correct and some not so correct....but my main point here is - why isn't your lender suggesting these things to you?

  • There should be local, downpayment assistance programs (some call them "first time homebuyer" programs....but most don't require you to be buying your first home) that can help with and even pay ALL closing costs.
  • The lender can "premium price" the loan.  Meaning, they can actually trade a little bit of the interest rate for paying for your daughter's closing costs.
  • The seller can contribute up to 4% of the loan amount to help pay for closing costs. That is the VA limit but that should a pretty considerable amount.
  • And you can even use a combination of these items to make sure you need $0 for closing costs.

Now, even if she needs $0 for closing costs.....she will still need about $2,000 just to get her offer accepted - Earnest Money, Option Money, Inspection Money, etc.

My main point here is....if your LENDER has not already shared this information with you and your daughter - then you need to find a different lender. These are HUGE red flags for me. A very entry level, low experience person should know that information above and should have been able to advise her already on those options. VA Loans are harder to close from the lending side than other loans. If your current lender doesn't know that basic information above then you will be in for a rough ride using them.

Thank you so so much. Please forgive I didn't make my post clear enough. He did say he was aware of few programs. But I wanted to make sure we didn't leave any thing unturn. So about 2hours ago. Everything worked out for the best. Just as you said she will need about 2000. The seller is willing to pay some of the closing costs and there's a another program as well. So she not really coming out of pocket. Also the 2thousand she paying out,shes getting it back through the VA. She's closing In 30 days. Thank you again so much for your response.

 I

Originally posted by @Stephanie Medellin :

@Crencenthia Brown  You shouldn't need to find any special program to help with closing costs, just have her real estate agent structure the offer with the seller paying her closing costs.

 Thank you, I was just being over protected mother. I do apologize I wasn't clear enough on this post at all. The realtor did say he knows of a few programs. I wanted to do some looking for myself,being that mom. But everything worked out perfectly. She's closing in 20 to 30 days. Thank you again for giving me that advice. 

Originally posted by @Glidden Rivera :

@Crencenthia Brown

Get 6% concession s from the seller.

Keep one thing in mind, the VA will assess a funding fee ( mine was 14k)

They roll it into the loan. I didn’t know this until I was ready to close.

FHA is very good too, you may not get the same interest as the VA loan, but it's pretty close.

But If basic closing cost are a barrier then the additional 3% down payment required by FHA would probably be a burden as well. With the VA

You can fund a 100% of the loan.

Lean on the seller for concessions, you will need to negotiate that with the seller. In most cases, you will add 6% to price of the home and receive the credit towards closing.

Ex: purchase price 100k

Add 6% to acquisition

New purchase price is 106k. 6k is credited towards closing.

You can try to negotiate that the seller contribute a portion of it so you don’t have add 6% to the acquisition ( may be 3% and the owner comes down by 3%)

You still get the max concession (6%)

Thank you.. you and someone else said almost the samething. The owner did agree to help with closing and the realtor also some other program as well. Now about that 14% you told me about I'm going to ask about that as well. Thank you so much for answering my question. 

 

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