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Can we roll closing costs into the loan on a purchase?

This is one of the most common misconceptions in the mortgage industry. You may have heard a friend or family member mention they were able to roll their closing costs into their mortgage loan; however this is not entirely true.

What this really means is that they were able to secure either a seller credit, which is when the seller agrees to pay the costs because they sold the house at more than the market value, or lender credit, which is when a lender will pay the closing costs in exchange for a higher interest rate. See below:

  • Fannie Mae (Conventional): The only way to not pay your closing costs out of pocket would be to include a seller credit as a contingency of your offer or speak to your loan officer about a lender credit.
  • Freddie Mac (Conventional): The only way to not pay your closing costs out of pocket would be to include a seller credit as a contingency of your offer or speak to your loan officer about a lender credit.
  • FHA: The only way to not pay your closing costs out of pocket would be to include a seller credit as a contingency of your offer or speak to your loan officer about a lender credit.
  • USDA: You can roll the closing costs into your loan only if the house appraises above the purchase price.
  • VA: The only way to not pay your closing costs out of pocket would be to include a seller credit as a contingency of your offer or speak to your loan officer about a lender credit.

 

To learn more about specific mortgage requirements, be sure to speak with an experience mortgage broker.

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