Anonymous

# Closing costs, FHA loan?

Hi, I'm buying a condo and the seller has counter offered at \$128000 and they'll pay closing costs. I know closing costs are about 3% of that, on average (so about \$3840). So if I accept that offer, than my mortgage (FHA loan) would be based on \$128000 + 3840 = 131840. Why isn't it just on the \$128000? I don't get it.

Update:

Thanks David Z. Why is the agent saying the mortgage will be on 131,840??

Relevance

your FHA loan will be 96.5% of \$128,000, plus a 1.75% upfront PMI premium. I assumed you are borrowing the max and putting 3.5% down.

96.5% 123,520

PMI 2,161

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125,681

make sure you use language "prepaids and closing costs" and make sure you specify an amount of costs the seller will pay. do not leave it open. Specify an exact figure.

• Anonymous

While David and Arbor both have answered correctly there is also the possibility that the seller countered your offer by increasing the sales price to cover the concessions.

For example:

The listed price is \$135,000.00

You offered \$125,000.00 with seller paying closing costs of say \$5,000.00.

This offer would net the sellers \$120,000.00 (\$125,000.00 minus the \$5,000 seller concessions)

What usually happens is the seller will counter which would look something like this:

The list price of \$135,000.00 + the seller concessions of \$5,000 = new sales price of \$140,000.00 which effectively allows the buyer to roll the closing costs into the new loan.

Source(s): I'm a mortgage banker/broker

David has the correct calculation. You don't add the closing costs on top of the sales price, it's included in the sales price.

Source(s): Mortgage lender