Yes, as we follow last week's topic….there is a down side to non-recurring closing cost credits. There's a limit! While it may sound marvelous to inflate the offer price and get "cash back," the lenders are ahead of you.

Problem 1: Using the $400K purchase with 3% in NRCC example, it's possible that you may not have $12,000 in closing costs.

Closing costs consist of your loan origination fees, title insurance, title company/escrow fees, transfer taxes for county or city, notary fees, appraisal fee, inspection fees, and other odds and ends. If the seller is paying title and escrow, transfer taxes, inspection fees, etc., it is possible that your closing costs will be less than 3%. (Usually closing costs run between 1.5% and 3% the sales price.)

Most lenders will limit the amount of credit you can receive in non-recurring closing costs, so it's good to ask for the limit up front so you end up with the number you asked for. Of course, the purchase contract can be written to incorporate enough NRCC to the buyer's side so the maximum number is reached.