Can I Roll Closing Costs Into My Conventional Mort…

When you buy an investment property, the down payment isn’t the only thing you need to budget for. You also have to pay closing costs, usually 2% to 5% of the cost of the property. If a property’s purchase price is $400,000, for example, the closing costs will be $8,000 to $20,000.

This is a significant expense, and many real estate investors don’t have that much saved to pay upfront closing costs. However, there is a strategy you can use to buy properties without paying closing costs upfront. You may be able to defer payment of the closing fees by rolling them into your mortgage.

What Are Closing Costs?

Closing costs are fees charged by your lender and other parties when you buy an investment property. They are usually associated with processing your mortgage loan. Closing costs are typically paid by the buyer at the closing, but the seller can also partially or fully cover closing costs. Who pays these costs can be negotiated before the closing.

The closing costs you will be required to pay when buying a property will vary depending on the mortgage loan lender and other factors. 

Typically, fees you may encounter include:

  • Notary
  • Courier 
  • Escrow 
  • Attorney
  • Appraisal
  • Recording
  • Credit report
  • HOA transfer
  • Title insurance 
  • Loan application
  • Bank processing
  • Mortgage origination
  • Loan discount points

How to Roll Closing Costs Into a Loan

The process to roll your closing costs into your mortgage is simple, and your lender will take care of the details. The first step is to ask your lender if they will allow you to roll your closing costs rather than have you pay closing costs upfront. If your lender approves, the closing costs will be added to the loan amount (the principal), and you will repay them over time with your regular monthly mortgage payments. This, of course, will also mean larger monthly payments but less upfront costs.

It’s a good idea to shop around before selecting a mortgage lender to make sure you get the best deal…

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