In the past, as a seller, I’ve offered to cover the closing cost for the buyer as an incentive. This has been negotiated as 6% of the purchase price. But I’m thinking that may be too expensive. Should it be 5-6% of the MORTGAGE AMOUNT or 5-6% of the PURCHASE PRICE?
I am currently working as a morgage broker, and in my opinion I would stick with 3%. This is the most allowed by conventional loan standards and also the most allowed by some sub-prime lenders.
I just asked my father, a loan officer at a mortgage company your question. Closing costs vary in percentages of a loan or sale. They consist of several fixed fees and possible points on a loan. Around here they are about 3-3.5%.
If you are trying to figure out how much to offer to pay, calculate your price, property value, etc and if possible, add in the “maximum” you will pay toward closing.
“Owner will pay up to $3000 in closing.” If closing is less, great, if not the buyer pays the difference.
Or you may agree to up the price to pay more if the buyer has room to do so in his mortgage.