How to get the seller to pay closing costs?

If you plan to buy a luxury home in Michigan, you may need more than a traditional conventional loan to finance your desired property.

The federal government limits how much we can borrow. While the average home fits into this bracket, some properties need more significant loan limits than what’s allowed with a traditional 30-year loan.

The good news is you can get a jumbo mortgage in Michigan that provides larger funds that conventional mortgages do not cover.

But before you go out and look for your dream home, you need to know if you have enough to cover your downpayment and closing costs.

Closing costs usually range from 2 to 5% of your mortgage, and for a jumbo loan, this may be a significant expense that you’re not prepared to pay.

We share valuable tips for avoiding paying those hefty closing costs during mortgage signing.

Why do you need to pay closing costs?

The buyer usually pays closing costs, and these are charged by lenders for processing your home loan. You pay for title searches and property appraisals, attorney fees, loan origination fees, recording fees, and much more admin work that lenders do related to your home loan.

Closing costs are paid apart from your downpayment, which may surprise many who didn’t expect to pay for this added expense.

It’s a good thing that closing costs can be negotiated with your lender, and if this doesn’t work out, we can take advantage of seller concessions where your seller can pay for closing costs.

If you want to know how much your mortgage payments will be, a Michigan mortgage calculator is a helpful tool you can try out.

What are seller concessions, and how do you get them to consider paying for closing costs?

When you hear about seller concessions, these are costs a seller may agree to pay when selling their property. Sellers can either pay for the entire closing costs or part of it. Some may decide to pay for transfer taxes and other expenses.

As a buyer, you need to consider seller concessions as a trade-off. Sellers would more likely agree to a concession if they benefited from what you are proposing. A win-win situation is the best scenario here.

Let’s look at how you can leverage seller concessions and get them to pay for closing costs.

1. Pay the full listed price of the property

A lowball offer won’t get a seller to agree to pay your closing costs. The best strategy is to offer to pay for the full asking price and ask the seller to help by paying for closing costs.

If your seller offers to pay for half the closing costs, don’t play hardball and accept the offer. Let’s say your closing costs are pegged at $8,000. It would be better to pay $4,000 instead of paying the full amount on your own.

2. Show them that you are ready to close anytime

Sellers would like to deal with buyers ready to close the deal soon. On your end, you can get pre-approval to show that you mean business. If a seller sees that you are prepared to close anytime, they may agree to pay for your closing costs as a concession.

3. Avoid making outrageous demands

If you want your seller to pay closing costs, don’t come up with unreasonable demands that may sour the negotiation. Let’s say you discover repair and maintenance costs during the home appraisal. You can’t ask the seller to pay for them on top of your closing costs. 

A reasonable proposal where both of you would benefit is always the goal when making seller concessions.

4. Consider the market situation

If you are buying during a seller’s market with plenty of offers, asking for sellers' concessions for closing costs may not be a good idea. However, with the current market, many homes have been sitting on the market for more than a month. That’s a great leverage you can use to motivate the seller to meet you halfway with concessions.

Are you ready to buy your new Michigan home?

If you are one of those first-time home buyers who experienced sticker shock when closing costs were presented, you are not alone.

Now that you know about closing costs, you should add them to your budget when buying a home. You can also apply our tips on getting seller concessions to lower or eliminate closing costs.

If you are ready to move forward with your luxury home purchase, get pre-approved for a jumbo home loan by Reliance Financial Group.

Call or send us a message. Our loan experts would be happy to assist you.

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.