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Health & Fitness

What are non-reoccurring closing costs vs. closing costs?

Whether you're new to the home buying process or a seasoned investor one of the most asked questions I get is

 

Whether you’re new to the home buying process or a seasoned investor one of the most asked questions I get is, “when submitting an offer on a property and I want to get help with my closing costs should I ask the seller for non-reoccurring closing costs or just closing costs?”

The simple answer is closing costs; here’s why:

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-when you ask for, say 3% back for closing costs, you can use the 3% for all your closing costs including points, origination fees, processing, underwriting, title insurance, property taxes, homeowners insurance, etc.  The seller credits you the money and you use it how you need to.

-when you ask for a seller credit and state in the contract or the seller counters you that the credit can only be used for non-reoccurring closing costs you’re severely limiting yourself. A non-reoccurring closing cost credit means only those fees that are charged once can be paid for.  In the case of real estate there are costs you pay that are reoccurring such as property taxes and homeowners insurance.  With FHA, VA, USDA, and conventional loans with less than 20% down you’re required to have an impound account to pay your property taxes and homeowners insurance.  If you get a non-reoccurring closing cost credit you couldn’t use the seller credit to pay those costs.  Depending on the time of year you purchase your home and the purchase price that could be thousands of dollars that you’d have to pay for.

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If you’re going to ask for closing costs, keep it simple and always ask for closing costs, not non-reoccurring closing costs.

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