Is financing the closing costs a thing??

[Carloz Gil]

BPers!

Found a off market deal we'd like to pursue in Pittsburgh PA. It is a portfolio of properties (all are cash flowing well) for $630k. We have not done a deal of this size and even though we've found a creative way of funding it, the closing costs are presenting a problem. We are looking at about $30k in closing costs and even though we have some capital, that is way over our budget. We've overcome the obstacle of funding it but what do you do for the closing costs? 

[Chris Mason]

Originally posted by @Carloz Gil:

BPers!

Found a off market deal we'd like to pursue in Pittsburgh PA. It is a portfolio of properties (all are cash flowing well) for $630k. We have not done a deal of this size and even though we've found a creative way of funding it, the closing costs are presenting a problem. We are looking at about $30k in closing costs and even though we have some capital, that is way over our budget. We've overcome the obstacle of funding it but what do you do for the closing costs? 

 Hi Carloz,

You can finance closing costs into the interest rate via the magic of discount points that are a negative number, but not into the loan balance directly.

I did this personally when I purchased my first home many moons ago. Took an $8k lender credit (aka negative discount points) to cover many closing costs in exchange for a higher rate. The higher rate translated into an extra $150/mo. Then I refinanced six months later, call it $3k in closing costs. 

$8,000 - $150*6 - $3000 = $4100 in the green. Those numbers are for a loan amount smaller than yours, and I didn't want to go crazy and absolutely max it out because.... 

...Big risk of course is that I had no guarantee for where rates would be six months in the future when I refinanced. So I picked a higher rate that I wouldn't kill myself if I was stuck with it, but not the highest available.