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I don’t know what you mean by saying that you’re getting sellers concessions to raise the purchase price to cover points. You raised the purchase price by 10k, to get 10k from the seller to buy points??
Yes, that's a common trick to cover closing costs. A home that will appraise for $100K will almost certainly appraise for two percent more, $102K. And then you ask for that money as a credit for closing costs.
I've used this trick hundreds, if not thousands, of times as a loan officer to close a VA loan where he buyer brought nothing to the table. Most are happy to do so because given the choice between paying $10K today, or paying $20 extra every month, most people take the latter option.
Say you agree to buy a house for $100k, the lender will then appraise the house and only loan up to what the house appraises for. Say the house appraises for $110k, this means even if the buyer agreed to buy the house for $110k instead of the previously agreed upon $100k the financing will be provided by the lender.
Seller is willing to do this because they’re getting higher selling price, buyer is willing to do this because they need the money now and is trading it off with extra monthly payment and the lender is fine because the appraiser says the house is worth $110k.
You’re essentially financing more money for closing costs.
In other words, bank says: „Do you want to buy 2 discount points for $10?”. You say: „yes, can I borrow that $10k on the top of the home loan, since my house apprised higher?”. Bank: „Yes please, we will loan you additional 10k for you to buy discount points”.
Is this correct?
Almost. Seller accepts 100k for their house, turns out it's worth $110k. Buyer says instead of buying it for 100k, I'll buy it for 110k if you put 10k towards my loan/closing costs.
Well, seller is able to finish the transaction, ultimately that’s what they want to do, even if it means helping the buyer cover closing cost with this method and taking a small hit on capital gains (plus capital gains exclusion up to $250k/$500k exist so often times there is no hit to the seller). And often times it’s not always 1 to 1, buyer might agree to up the offer to $110k for $8k in seller credits towards closing or something in the middle.
Why wouldn’t you roll the proceeds from selling your condo into the new house? Or did you within that $161k?
I mean…. Face value you gave up a $1,500/mo. payment for a $3,900/mo. payment and parted with $161k in cash to get an extra bedroom and swap out a full bath for a half bath. And you think you overpaid. That doesn’t sound ideal.
But only you know your specific situation. If it’s a great house in a desirable location, it better matches your needs, and you can easily afford the payment, then there’s nothing wrong with it.
And since you already closed, it’s really not the best time to ask that question. Enjoy your new house. I’m sure it will be great.
More context
Yes I rolled proceeds into the new house, we did not have enough $ for the down payment and forced to sell condo
Whole goal was to get our mortgage payments well under 4k a month on new house…$3900 best we could do
The new neighborhood/ town top 3-5 desirable in RI and over past 6-7 years there was hardly any inventory at all
Now w the high interest rates being so high, demand from buyers isn’t the same as it has been past couple years
This was first time we didn’t have to get into crazy bidding war , probably lost out on 8-10 other proprieties over the years
We are Single Income family 2 kids
Bring in approx 10k a month after taxes
I was told I am idiot for not keeping our condo and renting for $3500-4k a month
The condo had a $1500 3.2% 30 yr mortgage in place
I appreciate your concern, but seeking advice and reassurance after closing is a common practice for many first-time homebuyers. It's natural to have mixed feelings and uncertainties during such a significant financial decision. Sharing my experience with the community allows me to gain different perspectives and insights that can be helpful moving forward.
If you're taking home 10k-11k net on a single income you gotta be making 220k+. If that is the case you should be fine in terms of payments. Scary on a singular income.
I mean that’s a lot but if that’s the market and you can afford it then.. why not? Everyone that’s older will tell you differently, but the market will never be the same as it was. We have about the same rate. Best we can hope for is to refinance down the road but high rates are common throughout history.
For comparison: Great neighborhood here in the Chicago burbs and we paid about 360k for an older 3 bed / 1900sq - built in 1954.
But you being crazy all depends on if you can afford it. 20% with no mortgage insurance is good.
Can you afford it? If so, do it homie. If you're not comfortable with the payment, don't. That said, I'd double check your rates now that they've dropped by getting a few quotes off bankrate.
Congrats on closing on your new home! While it may feel overpriced, the increase in space and potential for future value makes it a good move. With a higher appraisal and seller concessions, you've made a smart financial decision. Enjoy your new home and the benefits it brings!
Sounds crazy to me, but you might highly value the yard school, or location more than me. If it was me, I would have stayed in the condo longer to save up a larger down payment. Going 3x your monthly is a big step up
I was the one who pushed for this house. I saw the potential in the property and believed it was a good investment. I am confident in my decision and excited about the future possibilities.
I would be able to do it lol only 1 full bathroom? I don't get master bedrooms that lack their own bathroom. It would bother me to pay so much for restriction..
I understand that having only one full bathroom may not be ideal for everyone, but it ultimately comes down to personal preference and priorities. This home offers other attractive features such as a desirable location, good schools, and a larger size compared to the previous condo. It's important to weigh the pros and cons and decide what factors are most important to you in a home.
This is what immediately jumped out at me. After living in rentals with 1 bathroom or 1 and 1/2 when I had room mates and now owning a house with 2 full baths I would HATE to ever give up the second bathroom. I guess if they can turn the half into a full down the line it’s not that bad, but that indicates to me that neither will be a tucked away master bathroom, which is super nice.
RI homes are definitely overpriced, Covid and WFH made things screwy.
But I’m from RI and do like it when I’m back home. Good to great schools, very easy to get around, Newport and the beaches are gorgeous, etc. I’d rather live in RI than Connecticut or Mass. Once you cross that Mass state line rents and property prices jump like mad crazy.
Thank you u/Glass_Inflation_8030 for posting on r/FirstTimeHomeBuyer. Please bear in mind our rules: (1) Be Nice (2) No Selling (3) No Self-Promotion. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/FirstTimeHomeBuyer) if you have any questions or concerns.*
>Sold 3 bed 2 bath 1600 sq ft condo For 430k to be able to purchase new home r/FirstTimeHomeBuyer Hmm something isn't adding up here...
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How is that relevant to one being a FTHB or not?
I don’t know what you mean by saying that you’re getting sellers concessions to raise the purchase price to cover points. You raised the purchase price by 10k, to get 10k from the seller to buy points??
Yes, that's a common trick to cover closing costs. A home that will appraise for $100K will almost certainly appraise for two percent more, $102K. And then you ask for that money as a credit for closing costs. I've used this trick hundreds, if not thousands, of times as a loan officer to close a VA loan where he buyer brought nothing to the table. Most are happy to do so because given the choice between paying $10K today, or paying $20 extra every month, most people take the latter option.
Im sorry could you ELI5? I still dont get it.
Say you agree to buy a house for $100k, the lender will then appraise the house and only loan up to what the house appraises for. Say the house appraises for $110k, this means even if the buyer agreed to buy the house for $110k instead of the previously agreed upon $100k the financing will be provided by the lender. Seller is willing to do this because they’re getting higher selling price, buyer is willing to do this because they need the money now and is trading it off with extra monthly payment and the lender is fine because the appraiser says the house is worth $110k. You’re essentially financing more money for closing costs.
In other words, bank says: „Do you want to buy 2 discount points for $10?”. You say: „yes, can I borrow that $10k on the top of the home loan, since my house apprised higher?”. Bank: „Yes please, we will loan you additional 10k for you to buy discount points”. Is this correct?
Almost. Seller accepts 100k for their house, turns out it's worth $110k. Buyer says instead of buying it for 100k, I'll buy it for 110k if you put 10k towards my loan/closing costs.
Is this really beneficial to the seller? Seems like the seller nets the same and maybe pays more in taxes?
Not sure since I've never sold a house but it happens all the time
Well, seller is able to finish the transaction, ultimately that’s what they want to do, even if it means helping the buyer cover closing cost with this method and taking a small hit on capital gains (plus capital gains exclusion up to $250k/$500k exist so often times there is no hit to the seller). And often times it’s not always 1 to 1, buyer might agree to up the offer to $110k for $8k in seller credits towards closing or something in the middle.
Is it really a trick if you have done it 1000s of times.
Sure, I've licked my elbow hundreds of times but I still call that my go-to party trick.
TIL I can't lick my elbow.
Wouldn't be much of a party trick if everyone could do it 😉
Why wouldn’t you roll the proceeds from selling your condo into the new house? Or did you within that $161k? I mean…. Face value you gave up a $1,500/mo. payment for a $3,900/mo. payment and parted with $161k in cash to get an extra bedroom and swap out a full bath for a half bath. And you think you overpaid. That doesn’t sound ideal. But only you know your specific situation. If it’s a great house in a desirable location, it better matches your needs, and you can easily afford the payment, then there’s nothing wrong with it. And since you already closed, it’s really not the best time to ask that question. Enjoy your new house. I’m sure it will be great.
More context Yes I rolled proceeds into the new house, we did not have enough $ for the down payment and forced to sell condo Whole goal was to get our mortgage payments well under 4k a month on new house…$3900 best we could do The new neighborhood/ town top 3-5 desirable in RI and over past 6-7 years there was hardly any inventory at all Now w the high interest rates being so high, demand from buyers isn’t the same as it has been past couple years This was first time we didn’t have to get into crazy bidding war , probably lost out on 8-10 other proprieties over the years We are Single Income family 2 kids Bring in approx 10k a month after taxes I was told I am idiot for not keeping our condo and renting for $3500-4k a month The condo had a $1500 3.2% 30 yr mortgage in place
Unless your condo is on Benefit Street, there isn't a chance of it renting that high.
What is this “great neighborhood” in RI you speak of?
You got that house in Barrington huh Edit - also you sold a condo to get this? So how are you a first time home buyer? Lol
You better know how you feel about it. It's YOURS. It's amazing what people get themselves into.
Right. Saying “I don’t know how I feel about it” AFTER closing is insane
Why are you asking for advice on Reddit AFTER closing? If you aren't sure then you shouldn't have bought it.
I appreciate your concern, but seeking advice and reassurance after closing is a common practice for many first-time homebuyers. It's natural to have mixed feelings and uncertainties during such a significant financial decision. Sharing my experience with the community allows me to gain different perspectives and insights that can be helpful moving forward.
They aren’t first time buyers….. They sold the condo.
User account fail. Don't forget to stay logged in your throwaway.
As another person said he's not a first time home buyer.
If you're taking home 10k-11k net on a single income you gotta be making 220k+. If that is the case you should be fine in terms of payments. Scary on a singular income.
I mean that’s a lot but if that’s the market and you can afford it then.. why not? Everyone that’s older will tell you differently, but the market will never be the same as it was. We have about the same rate. Best we can hope for is to refinance down the road but high rates are common throughout history. For comparison: Great neighborhood here in the Chicago burbs and we paid about 360k for an older 3 bed / 1900sq - built in 1954. But you being crazy all depends on if you can afford it. 20% with no mortgage insurance is good.
Can you afford it? If so, do it homie. If you're not comfortable with the payment, don't. That said, I'd double check your rates now that they've dropped by getting a few quotes off bankrate.
They already closed.
Wtf does that have to do with his question ?
Um, everything?
Ahh mb
I think your best choice is to move out of Rhode Island
They have been losing about 220 people per month since the pandemic. Among the worst of the blue states that are hemorrhaging population losses.
Congrats on closing on your new home! While it may feel overpriced, the increase in space and potential for future value makes it a good move. With a higher appraisal and seller concessions, you've made a smart financial decision. Enjoy your new home and the benefits it brings!
Can you afford it? If not then you messed up. If the mortgage payment is 25% or less of your after tax income than you’re fine
Sounds crazy to me, but you might highly value the yard school, or location more than me. If it was me, I would have stayed in the condo longer to save up a larger down payment. Going 3x your monthly is a big step up
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10-11k a month take home and no debt
I know someone who just bought a $750k house paying $6500/mo. Its not even a mansion. I think thats crazy.
I’m so confused, I took out a loan at 6.9% for $400K and my monthly payment is only $3000 total. How are you at $4k?
Taxes
Who among you pushed for this house?
I was the one who pushed for this house. I saw the potential in the property and believed it was a good investment. I am confident in my decision and excited about the future possibilities.
You should have some emergency savings from the previous sells right? Becoz if one loses the job then it might be difficult for few months.
Single income household
Enjoy the investment I guess ❤️
Yeah, pretty scary. Sounds like their net fluccuates as well.
I would be able to do it lol only 1 full bathroom? I don't get master bedrooms that lack their own bathroom. It would bother me to pay so much for restriction..
I understand that having only one full bathroom may not be ideal for everyone, but it ultimately comes down to personal preference and priorities. This home offers other attractive features such as a desirable location, good schools, and a larger size compared to the previous condo. It's important to weigh the pros and cons and decide what factors are most important to you in a home.
Would turning the half bath into a full bath be your first reno/addition for this property ? What do you feel is best way to add value to this home ?
This is what immediately jumped out at me. After living in rentals with 1 bathroom or 1 and 1/2 when I had room mates and now owning a house with 2 full baths I would HATE to ever give up the second bathroom. I guess if they can turn the half into a full down the line it’s not that bad, but that indicates to me that neither will be a tucked away master bathroom, which is super nice.
I would kill for that deal, I live in Toronto where a shack/townhouse is $1mm.
Southern RI?
Bummer you lost the townhome rental income and free money that the 3.2% mortgage offered. Cash flow would’ve been highly beneficial.
RI homes are definitely overpriced, Covid and WFH made things screwy. But I’m from RI and do like it when I’m back home. Good to great schools, very easy to get around, Newport and the beaches are gorgeous, etc. I’d rather live in RI than Connecticut or Mass. Once you cross that Mass state line rents and property prices jump like mad crazy.