Should you consider financing closing costs, escrow reserves, or other cash needed at closing?
Some of the "cash needed to close" as it's sometimes called includes settlement costs and fees, prepaid interest, escrow reserves, state or local government charges, or even extra funds needed to pay off your existing mortgage. Some or all of those costs can sometimes be financed as part of your new mortgage loan.
Lenders will increase the interest rate to help you pay for closing costs. This is available on Conventional, FHA, VA and USDA loans. With today's market, there are multiple bids on properties and asking the seller to pay closing costs can sway the seller to take another offer. So, by raising your interest rate the lender will pay your closing costs and pay them at closing for you.
The bottom line in many cases is you can reduce your up-front costs for financing in exchange for higher monthly payments for the life of the loan. But whether, and to what extent, you can do this depends on the value of your home and the amount of your new mortgage, and what options you decide are best for you.
If you've built up some equity in your home, when you refinance, you may be able to "cash out" some of that equity to pay off credit cards or other revolving debt, improve your home, help pay for college, or anything else you can think of. The same is true of refinancing costs: If you have enough equity in your home, you may be able to roll some of the cash due at closing into your loan.
I am here to help you with the best loan structuring and programs that works for you! Call, text or email me and I'll show you the options available to you. 941-504-1445 Sherry@SherryBitner.com