Realistic Cost of House Hacking

[Caden Glenn]

I am 18 years old and plan to buy my first multifamily house hack in the next year or so. I am wondering what to realistically expect it to cost. I know that it is 3.5% down payment with an fha loan. Closing costs about 3-5%. Is there a way to avoid closing costs on my end and have seller cover? Is that a rare occasion for that to happen? What should I expect to spend on inspections? Any other costs I should be aware of? Thank you!

[Kameron Wilson]

[Account Closed]

You can have your agent try and work a buyer credit in an addendum at closing. For example, offer $300k with a $5k buyer credit at closing as opposed to say $295k. Seller basically covers your closing costs, essentially transferring that $5k from an immediate closing to cost to one spread across a 30-year mortgage at 3.5%.

[Laura Shinkle]

@Caden Glenn sounds like you need to find a great Realtor to talk to in your area! I'm not in Cincinnati, but these are all things I cover in my buyer consultations. 

1. You can do as little as 3% down as a first time homebuyer with a conventional loan, assuming you qualify. You can also do 0% down if you want to go the USDA or VA route, or perhaps could qualify for down payment assistance. Depends on your situation and what local options are available in OH.

2. Closing costs should be closer to the 3% than the 5%. If you were paying 5% closing costs on a $300k purchase price, I'd tell you to find a different lender. 

3. Inspections vary, and depends on what you want. In NC (no idea if it's different in OH), a standard mechanical inspection depends on the size of the property, if it's a crawl space, slab or basement foundation, etc. Typically they run $500-$1000 depending on those factors and any additional inspections your Realtor recommends. 

4. Appraisals are another item the lender may require to be paid prior to closing. In the CLT area, it's usually $500-$700. 

If you're gearing up to buy a home, especially since it's your first time, talk to a Realtor who can prepare you for these expenses, what to expect as far as deposits, as well as connect you with a fantastic lender who will be able to advise/guide on the lending side. 

Best of luck!

[Caden Glenn]

Quote from @Account Closed:

You can have your agent try and work a buyer credit in an addendum at closing. For example, offer $300k with a $5k buyer credit at closing as opposed to say $295k. Seller basically covers your closing costs, essentially transferring that $5k from an immediate closing to cost to one spread across a 30-year mortgage at 3.5%.

 Is this something that is common? Do sellers usually give any pushback on this?

[Caden Glenn]

Quote from @Laura Shinkle:

@Caden Glenn sounds like you need to find a great Realtor to talk to in your area! I'm not in Cincinnati, but these are all things I cover in my buyer consultations. 

1. You can do as little as 3% down as a first time homebuyer with a conventional loan, assuming you qualify. You can also do 0% down if you want to go the USDA or VA route, or perhaps could qualify for down payment assistance. Depends on your situation and what local options are available in OH.

2. Closing costs should be closer to the 3% than the 5%. If you were paying 5% closing costs on a $300k purchase price, I'd tell you to find a different lender. 

3. Inspections vary, and depends on what you want. In NC (no idea if it's different in OH), a standard mechanical inspection depends on the size of the property, if it's a crawl space, slab or basement foundation, etc. Typically they run $500-$1000 depending on those factors and any additional inspections your Realtor recommends. 

4. Appraisals are another item the lender may require to be paid prior to closing. In the CLT area, it's usually $500-$700. 

If you're gearing up to buy a home, especially since it's your first time, talk to a Realtor who can prepare you for these expenses, what to expect as far as deposits, as well as connect you with a fantastic lender who will be able to advise/guide on the lending side. 

Best of luck!

 Thank you!

[Ryan Thomson]

Hey @Caden Glenn one way I try to avoid closing costs for myself or my clients is to ask for 5k over their asking price and then include 5k of seller concessions in the offer. This essentially finances your closing costs into the 30 year mortgage. 

[Caden Glenn]

Quote from @Ryan Thomson:

Hey @Caden Glenn one way I try to avoid closing costs for myself or my clients is to ask for 5k over their asking price and then include 5k of seller concessions in the offer. This essentially finances your closing costs into the 30 year mortgage. 

 Is this scaleable for purchase price. For example if closing costs are 3%, 100k property, 3k seller concession, 200k property, 6k seller concession?

[Ryan Thomson]

Quote from @Caden Glenn:

Quote from @Ryan Thomson:

Hey @Caden Glenn one way I try to avoid closing costs for myself or my clients is to ask for 5k over their asking price and then include 5k of seller concessions in the offer. This essentially finances your closing costs into the 30 year mortgage. 

 Is this scaleable for purchase price. For example if closing costs are 3%, 100k property, 3k seller concession, 200k property, 6k seller concession?

 Closing costs are not typically related to the purchase price. They are generally a range regardless of the purchase price. In Colorado Springs, they range from 5-7k. 

[Laura Shinkle]

@Caden Glenn Ryan is right, closing costs aren't a percentage of the loan or purchase amount. It's kind of a rule of thumb. Know that there are limits to how much you can get from a seller in terms of closing costs. If you're putting less than 10% down, then 3% of the purchase price is the maximum you can get. On a $100,000 property purchase, that would be $3,000. If you put between 10-20% down, then the max amount is 6%. More than 20% down, I believe the limit if 9%. Not that you'll likely be able to use all of that in closing costs, just figured I'd mention it. 

Whether that's common and/or doable is totally dependent on the market. If it's competitive and a seller's market, its tough to get a seller to agree to it. The appraisal also comes into play. In Ryan's example, that would only work if there aren't other offers and/or the it's the best offer for the seller to accept. So to sum up, the frustrating answer is it depends. 

[Sam McCormack]

@Account Closed

Jonathan hit the nail on the head @Caden Glenn

I was going to say the exact. I shot you a message about buying!

[Jordan Fiore]

Quote from @Caden Glenn:

I am 18 years old and plan to buy my first multifamily house hack in the next year or so. I am wondering what to realistically expect it to cost. I know that it is 3.5% down payment with an fha loan. Closing costs about 3-5%. Is there a way to avoid closing costs on my end and have seller cover? Is that a rare occasion for that to happen? What should I expect to spend on inspections? Any other costs I should be aware of? Thank you!

 It is not a rare occasion. All the seller cares about is the bottom line for them. How much they are getting after all the expenses on their end.