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The Advantages of Paying Your Own Closing Costs When Buying a Home

There are two big advantages of paying your own closing costs when buying a home in Central Kentucky.

First it puts you in a position that is most favorable with the sellers.

Payements increase with the seller paying closing costs.

Asking for closing costs when buying will cost the buyer a lot of money in the long term.

We are in a sellers market. It is likely that when you find your home there are other buyers also considering that same home. The net profit from the sell of there home is what is most important to the seller. If the sellers have to increase the price of their home to cover closing costs that puts them in a more difficult situation.
These are questions that sellers will likely have when considering paying closing costs:

Will the home appraise for that higher price?
Are the buyers in a difficult financial situation since they need closing costs?
Will this mean they are more likely to push harder to get repairs during the inspection process?
Will this mean they are more likely to default on the purchase agreement?

If the seller has more than one offer it is logical they are going to look at the offers in which they are not paying closing costs first.  Time is of the essence in these situations.

The second advantage to NOT asking the seller to pay closing cost is the long term financial advantage to the buyer.

Since the seller will want a higher price when paying closing costs that will be passed on to you.
The higher price will mean higher cost to you the buyer.

A HIGHER MONTHLY PAYMENT
HIGHER TAXES
HIGHER INSURANCE

For example:

Joe and Jill are hoping to buy a home for $150000. If they ask for $5,000 in closing costs their additional monthly costs at 4 per

Paul with a sold sign.

Paul Campbell standing by a sold sign.

cent interest will be $35.54.

$35.54 a month additional cost is $426 dollars a year. For the life of a 30 year loan that is $12,794.  So asking the seller to pay $5,000 in closing cost will eventually cost the buyer $7,794.

CAUTION: This does not mean buyers should never ask for closing costs.

If the only way to buy a home is to ask the seller to pay closing cost then by all means ask. Waiting till you have the money to pay your closing cost will likely mean that you will lose even more money. With the appreciation of home costs being historically a fact waiting even a year may end up being even more costly then asking a seller to pay closing costs.

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Paul Campbell, realtor in Lexington Kentucky
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