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House - help me understand!


Forum: Financial Planning and Budgeting

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  #1  
June 4th, 2009, 04:08 PM
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Join Date: Oct 2004
Location: *queen city* of North Carolina
Posts: 9,497
When you buy a new home from a builder, should you request that they pay closing costs? I was talking to my dad (Who just bought a house from a builder) and said they paid closing costs, paid whatever to lower a point, and the first month of his mortgage - so we should get the same kind of deal or walk away.

Another thing he said, was the fee to draw up a contract/start construction should be non-existent - they should not be charging for that, and its a scam - they don't use the money towards the total down payment amount that they said the fee is for (its a 2k fee w/ KB Homes). Every builder I've ever heard of does some type of fee prior to begin construction as a measure of earnest money or whatever showing that you are serious about buying the house. Then that earnest money deposit goes toward the 3.5% required for the FHA loan we are interested in.

I'm just clueless, DH and I both are. And we're just starting this whole ordeal and already am getting worn thin about it.
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  #2  
June 4th, 2009, 05:25 PM
MrsSarah1's Avatar Mega Super Mommy
Join Date: Aug 2007
Location: California
Posts: 2,617
Was your dad's house already built?

A seller (builder or not) generally pays closing costs and other fees out of courtesy and as a little incentive for you to buy the house. "No money down!!!" Sound familiar?

However, if you are buying a house that has not been built yet, the builder is less likely to pay the closing costs because it really is not skin off their nose. The house doesn't exist yet, so they won't be losing money if they don't sell it, and paying the closing costs has no incentive for them.

Paying your interest rate down to a lower point is great, but only if you can do it to lower it several points. Lowering it only .5 or so won't really make that much of a difference. Most likely, the sellers of your dad's house only lowered it a small margine, probably not even enough to make a difference (which is why the sellers did it, not much money out of pocket for them, and your dad is happy). So, if a seller doesn't do that, it's not that big of a deal because it doesn't really matter that much UNLESS they are lowering it several points, then it's a big deal and will make a difference.

The seller that your dad bought his house most likely was having a deal at the time of the purchase. When we were looking at buying a new house (not built yet) the sellers were offering free upgrades of $40,000, lowering interest rate points by 1% and also paying closing costs.

Ultimately, that was not what made/broke the deal for us. If you like the house, you like the company, and you know that you can afford the payments, I don't think it would be wise to walk away just because they didn't pay the closing costs. It's like getting a free pair of shoe laces with a pair of tennis shoes; it's nice if you get them, but you wouldn't not buy them if they didn't come for free.

I do think that you should ask. Be confident and ask "My dad bought his house from Company Name. They did this this and that. What can you do for me?" Most likely they will offer you something. All they can say is no. And if they do say no, then ask yourself if you are willing to walk away from a new home because it doesn't come with good incentives?

(A new development down the street is offering a new car and a built in pool an no additional cost! If only... haha)
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  #3  
June 4th, 2009, 07:37 PM
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Join Date: Oct 2004
Location: *queen city* of North Carolina
Posts: 9,497
With my dad's house, it was the model homes and the last homes left to sell before they could "close out" the community - if that makes sense. So I'm sure they were offering as many deals as they could possibly come up with in order to get the houses sold. I mean, they even threw in the "show" items to a certain degree (curtains, and whatever else my dad wanted - new couches anyone?)

The only downside for us, is we were not "planning" on buying a house for another year. So we don't really have a ton of money saved up. Our lease is up on our apartment in October, and due to a multitude of problems we're moving either way. And quite honestly a mortgage payment is just about as much as rent. The house we are looking at a year ago was about 200k, now 136k. So, IDK. The sales lady said if you do the contract and all this week or early next week they can guarentee the house to be done by Oct 31. From my understanding is the 8k tax credit is good if you close before dec 1 right?
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