What Does it Mean When a Buyer Gets Credit at Closing?
by Laura Kingsbury
Buyer closing credits can offer a good incentive for a buyer to purchase a home.
A real estate closing is usually much more complicated that simply the buyer paying the seller the home's contract price. In most cases, a closing attorney is overseeing the allocation and transfer of a variety of funds between the seller and the buyer, including prorated utilities, real estate agent commissions, and often buyer's credits.
Why Offer Buyer Closing Credits?
Buyer credits are usually offered as an incentive from the seller to the buyer when the two parties are negotiating the home's sale prior to the closing. This is especially true in a buyer's market, when homes are not selling quickly due to pricing and an overstock of inventory. In most cases, buyer closing credits are positioned as a
way to lessen the steep closing costs for the buyer. When planning a home purchasing budget, the down payment and monthly mortgage payments are not all a buyer has to consider. Closing costs can often run thousands of dollars and add an additional expense for the buyer. Closing cost fees typically include fees for loan origination, appraisals, inspections, mortgage tax, underwriting, title search, title insurance and recording.
Seller Closing Concessions
Buyer closing credits can also come directly from the lender, rather than from the seller, to entice buyers to purchase homes. This tends to stimulate the economy and it helps the lender acquire more investments. In fact, some lenders routinely offer closing credit promotions in order to achieve this goal. When dealing with private lenders, these credits typically amount to several hundred dollars.
Government Agency CreditsSource: homeguides.sfgate.com