Closing Costs on New Construction

kannf1982

My husband and I are thinking about building a new home.  If you bought new, what was your experience with closing costs? Did you pay half? None? Did you negotiate them away or did you pay all of them? Also, how was your credit when you did that? Ours is in the 680-740 range - a bracket lower than where id like us to be, but not at the "Excellent Credit" Mark.  I ask bc some lenders have had like, "no closing cost" specials with the builders they partner with, but then the small print says "for well qualified buyers" which I assume is probably with a credit score in the high 700s to 80s versus where we're at. 

Also, what % of the home value were your closing costs?

 Thanks!

Sisugal

Closing costs when buying a house run about 6-7% of the mortgage amount.
In addition to 20% down payment, you have additional fees -- title insurance, deed recording, advance payment toward taxes and home insurance and usually 1 point .

In our area sellers are not paying anything toward closing costs.

I would read 2 books before you move forward
Home Buying for Dummies  and
Mortgages for Dummies ---they are loaded with great information.

Talk with a local realtor and also a mortgage lender for information that applies to your area.

(no closing costs - they are still paid, but in another manner - higher interest rates, etc.
Pay off consumer debt
Keep your housing expenses (mortgage + PMI+insurance+taxes+utilities+HOA) to no more than 25-28% of your TAKEHOME pay.
More than that amount you can easily find yourself house-poor.
A lender will allow you to borrow much more than is reasonably comfortable.
YOU are the one responsible to see that the monthly costs of home ownership fit your budget - not them.

Make sure you have a well funded emergency fund of 6 month's expenses on hand
20% down
Savings for moving, utility deposits, decorating, additional furniture, tools, ladders, outdoor equipment, lawn care, etc, etc, etc.
The small stuff adds up in a hurry and you do NOT want to put it on a  credit card

Sisugal

Other considerations -
Will you finance based on one income or two?
Do you plan/or have children?  Make sure you allow for child care expenses when figuring your budget or the loss of income if one of you plans to stay at home with the children.

IF you currently do not budget - start by tracking ALL income and spending - to the dollar.  Then categorize.  You will see right away where the money goes and if you can or want to make changes in how you spend/save so you can afford a house.
(utilities will be much higher in a house than an apartment)

audubonbride2013

We're in the building process right now.  A lot of the incentives to cover closing costs are tied to using the builder's lender.  Closing costs are higher for some items when you're buying new construction because there is no seller to split the costs.  We were able to get the builder to cover $15K if we went with their lender.  We're fine with this because we have excellent credit 760-810 between the two of us so the lender offers competitive rates.  They want customers with high scores because they're just going to sell off your mortgage right after you close and higher credit scores makes it easier to sell.  

Even if you get the builder to cover your closing costs you'll probably still have some additional costs.  For us, the $15K covers most of what the builder considers closing costs except about $1K, but we're still going to have to cover some prepaid items for our escrow accounts (taxes, initial HOA fee, home insurance) at closing.

FYI - We're putting 10% down instead of 20% and we won't have PMI because are credit scores are high enough to qualify us for lender paid MI.  We will take a slightly higher interest rate for lender paid MI over time it works out to our advantage since we probably won't be in this house the full 30 years.  Also we definitely are living within our means with this house even and won't be house poor.

short+sassy

At least in my state (Louisiana), laws regulate that the seller cannot put more than 6% of the price of the house toward closing.  But it wouldn't surprise me at all if we're the only state that has some weirdo, arcane rule like that. 

lexus192

We've built two homes....closing costs were never more than 1.5% of mortgage amount.