House Closing Costs

Many people want to buy a home but between the down payment and the house closing costs many people just cannot afford to buy a home. It is something that has plagued the home loan industry for years, but when you have an FHA loan you will find that you can pay very little to get into your dream home. With a loan that is insured by the Federal Housing Administration you have several things on your side that make the process of getting into a new home more affordable. When you look into this type of loan you may find that you can spend as little as a month or two of rent to get into your new home, or less!

Step into Your New Home Affordably with an FHA Loan

With an FHA loan you will find that you don’t have to pay as much in house closing costs as you would if you were closing with a conventional loan. Why is this? It’s simple, actually. With an FHA loan there are restrictions and limits on what sort of costs can be added into the house closing costs. What this means is that the lender, the broker, and the realtor do not have carte blanch to charge you for anything and everything that they can think of so they can make more money off of your purchase. Instead, they have to keep things honest and legit and the restrictions and limitations ensure that you are only paying what you are obligated to pay, and nothing more. These limitations can help you reduce house closing costs from the tens of thousands of dollars to just two or three thousand dollars!

In addition to the limitations on house closing costs, the FHA also allows for the seller to contribute as much as six percent to the borrowers house closing costs. What this means is that if you are working with a seller who really wants to sell their home and they want to make it as quick and painless as possible, they can kick in some of their profits and help you pay for the house closing costs. So, if you had house closing costs of $6,500 and the seller wanted to contribute six percent of the costs on a $100,000 home they would be paying $6,000 of your house closing costs so you would only need to pay $500 in house closing costs. Many buyers will not contribute this much but they will offer four or four and a half percent or something like that.

What is different about this is that when you are working with a conventional loan the seller is limited to contributing 3% to the borrowers house closing costs. You would be surprised how many sellers are willing to contribute more than the 3% to the buyer when they are able because they just want to get the home sold and they want to be done with the whole process of selling their home. Being able to accept these contributions of more than 3% from the seller can help to make the purchase of a new home much more affordable for the average home buyer. The difference between the three and six percent is $3,000 and at the end of the day that is a lot of money when you are trying to keep the costs of your FHA loan to a minimum.



house closing costs

When it comes time for you to acquire a home mortgage for your first home or for a second home, or perhaps you are just looking to refinance. Whatever the case may be, it is important to shop around for a home mortgage.

When it comes to a home mortgage, mortgage companies are very competitive, they want and compete for your business, so let them.

There are many places these days to track down a home mortgage, the easiest being the internet.

If you are a person with a good salary and excellent credit looking for a standard home mortgage, you shouldn’t have much trouble tracking one down. It would be as easy as walking into your local bank branch and asking the branch manager to set up an appointment with someone in their mortgage department.

On the other hand, if you are a person whose credit is a little bit challenged, tracking down a home mortgage may prove to be a little bit more challenging.

This is where the internet comes into play. There is a wealth of information to be found and people to help you achieve your dream of obtaining a home mortgage.

The people that are capable of helping you if your credit is damaged or challenged are called mortgage brokers.

Mortgage brokers are not actual lenders. Their job is to shop around for a mortgage for you.

Mortgage brokers easily have access to hundreds of wholesale lenders who lend to people with credit issues and unique situations. So, if your situation is unique, or you have credit issues, a broker may be ideal for you.

If your situation is unique, or your credit is challenged, it is still important to shop around for a home mortgage. By shopping around you will be doing yourself a huge favor, and you could possibly save yourself a bundle of money in house closing costs and interest fees’.

Allow for up to four brokers or loan officers to assess your situation, than wait for them to come back at you with an offer. The one that offers you the best deal within reason, should be the one you give most of your consideration to. Good luck.

house closing costs

We all agree, purchasing a home will be, for most of us, the largest purchase you will make in our life. You have found your future home, arranged for financing and are now waiting for the house closing date. But to many people’s surprise, there are other monies that will need to be disbursed before or on the closing date.

Some of the upfront costs you should plan on paying when purchasing a home include appraisals, inspections, earnest money, lenders fees, title company fees, and house closing lawyer fees. It is vital that you plan for these fees – speak to your real estate professional or your lender who will be able to outline and estimate all of these costs for you. The total cost of these various expenses and fees can run into the thousands and even the tens of thousands of dollars. It pays to be prepared.

You must also be careful of the 100% mortgages or no-money down loans. A no-money down loan does not mean that there aren’t any costs associated with the loan. In reality, these types of loans allow the buyer to borrow 100% of the purchase price of the home however the buyer is still responsible for the numerous other costs mentioned above.

You should also keep in mind that you will have to pay a portion if not all of that year’s property taxes. Typically, property taxes are called on and required to be paid in full as the home closes. A buyer, upon closing the home, will be called to pay his/her share of the annual bill as it is pro-rated. You may want to enquire about the property taxes of a specific house, or neighborhood, before signing the purchasing contract. Some neighborhoods are taxed more heavily than others.

There is however a way of “avoiding” having to pay some or all of house closing costs. As a borrower, you do have the right to ask a seller concession to cover your house closing costs and pre-paid items. This makes it so you do not have to come up with any money at all for house closing costs.

A seller concession is worked into the purchase agreement and the seller will end up paying for some or all of the house closing costs. The seller concession is either a flat fee or a percentage of the loan amount. This is a fairly common practice, particularly in depressed real estate markets.

As for pre-paid items, they generally consist of pre-paid interest and escrows. Many people run into difficulty reading and understanding the multiple costs that are involved with purchasing a home. Because of this, do not take any chances and talk to a loan consultant or mortgage broker. This will help clarify your financial obligations.

Purchasing a home is an exciting adventure. Don’t let your fear of the unknown spoil this joyous event. Being prepared and well informed will avoid you being shell-shocked when the time comes to paying the bills. The more informed you are, the better prepared you will be for the many upfront costs associated with buying a home.

house closing costs

The first task is to define what you can afford. This saves a great deal of inconvenience later if you realize what is within your budget. In order to figure this out, meet with a mortgage broker or lender. This defines the pre-approval process. If you are serving as your own general contractor, be sure that the lender also offers “sweat equity” loans so that you can get the best deal. After evaluating your income, your credit, and your debt to income ratio, your lender will be able to give you an answer. Usually within 24 to 48 hours, you will know what your finances allow in terms of affordability. Additional information such as required escrow funds and down payment at house closing time is also provided most of the time.

Once you have been pre-approved, you will then figure out the exact costs of the project. For most people, it is recommended that they take their pre-approval figure and reduce it by 15 percent. This allows some built-in room for extra expenses along the way. Once you have selected your modular home style, design, and amenities, manufacturing costs will be secure. It will be your task with your builder to specify all the other costs that will be needed to finalize your house closing costs form with your lender. These expenses will include excavation and landscaping costs, finishing work after the set, land lot costs, permitting expenses and several others. These are important to know at the beginning so you can hold your builder accountable.

When ready for preparing the house closing documents, your lender will need engineered drawing plans for your modular home, the home’s order sheet with specifications, a complete list of costs from your builder, a legal description of your lot, two years of employment history, and two months of recent bank statements. In addition, the lender will order an appraisal and title search for the property to make sure the appraisal covers the financing and that no liens are attached to the property. These are all standard steps of the financing process.

Depending on your situation, you likely will have a construction loan during the construction period before the actual mortgage loan is closed at completion. A construction loan basically allows you to pay your builder, your subcontractors, the manufacturer, etc. along the way before the final home closing is performed. Did you know the driver upon delivery of your modular home expects payment for the delivered modules? It would be an issue if there were no means to pay him. As work is completed, each vendor will expect payment, and a construction loan makes this easy while the building process proceeds.

Overall, because costs are more secure with modular homes, there are usually less surprises at closing that might otherwise occur with site-built home construction. Likewise, since modular homes are a better investment overall, the chance an appraisal will come in less than the amount financed is also uncommon. Modular homes actually give you the best ability to stay within your budget.

house closing costs

Recommended Book:
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Click on the image above to see book details.

Buying your first home? Not sure what the difference is between a variable rate and a fixed rate mortgage? Do you understand the true cost of borrowing? Keep reading for 7 invaluable mortgage tips that are critical for any first time home buyer.

1. The bigger the down payment, the better.

The lower your down payment, the more you’re going to pay on a monthly basis. With a 5 percent down payment, for example, you’ll be expected to pay for mortgage insurance and will most likely be subject to higher interest rates. Most lenders like to see a down payment of at least 10-20 percent.

If there is any way you can squeeze that 20 percent down payment during the purchase process, you can literally save yourself tens of thousands of dollars over the life of the loan.

2. Good credit will save you money.

Lenders base your interest rate and your subsequent cost of borrowing heavily on your credit rating. If your credit is poor, you may be advised to wait a few years while you build your credit back up. The amount you save with a lower interest rate after rebuilding your credit could be tens of thousands of dollars over the life of the loan.

3. Remember the house closing costs.

Every mortgage has hidden costs associated with it, from legal fees to home inspections to bank’s house closing costs. Before you commit to any mortgage, remember to ask about all the house closing costs. You don’t want a $5000 surprise on closing day.

4. Get pre-approved.

While pre-approval can sometimes be more difficult, you can also save yourself a lot of unnecessary headaches. Essentially, you apply to the bank for a potential mortgage up to a certain amount. From there, you have a clear idea of your budget as you search for houses, and you can consequently make an offer that won’t be dependent on potential financing.

Additionally, when a home seller knows that you are already pre-approved to borrow for the amount of their home, this lets him or her know that you are a more serious buyer and could gain you a few concessions during the negotiating.

5. Investigate FHA loans.

The Federal Housing Administration (FHA) offers free loan insurance to qualified buyers with a minimum 3 percent down payment. This insurance means you can get a better rate from lenders without having to pay for outside mortgage insurance. Typically, the FHA sets maximum limits that depend on your county and region, but are based on the median house price for that area.

6. Budget for home insurance and property taxes.

No lender will mortgage a home that has tax liens on it or isn’t properly insured. When laying out your home ownership budget, always remember to calculate the monthly cost for county property taxes and home insurance. Whether the lender collects amounts from you monthly to cover these fees or you pay them directly each year, these are inescapable expenses that must be accounted for in your budget.

7. Choose a reputable lender.

Don’t just accept the first mortgage offer you receive. Instead, look for a lender that’s stable, reputable and able to offer you quality customer service. A lending institution is one you will likely be dealing with for 30 years, so finding one with a stable history and good reputation should be a high priority.

house closing costs

I have to hand it to the Big 800 Pound Gorilla (aka BOFA) for making it seem as if they reinvented the wheel with their No Closing Cost Refinances. The Gorilla has a mighty big Public Relations and marketing budget, because they had every newspaper in town acting like they had come out with something new. Truth is, no closing cost refinances have been done by savvy Lenders for years. It is possible to get better advice, service, and price from the right Mortgage Broker or Banker than you will from the Gorilla – and still not pay house closing costs.

A majority of the public is under the impression that you can get a better deal by going straight to a Bank, than by dealing with a Mortgage Broker or Banker. The reality is that it completely depends on the person you are dealing with. If you have the right Mortgage Broker you can get an excellent deal….even a better deal from the same bank! How could you possibly get a better deal even though you are dealing with a “Middle Man”?? Let me explain….

Until recently the Gorilla, like most every other bank, or mortgage company had two divisions that you can get a mortgage from. One division is their Retail side, which is who you work with when you contact the Bank Directly. The other side is their Wholesale division, which can do as much as 3 times the amount of business as the Retail division, with tremendously less overhead. Think about it – the Retail division has to pay for lots of prime commercial office space, national advertising campaigns, public relations – huge money to keep in the public eye – a huge expense per loan. The Wholesale division, on the other hand only has to let a very small target market know about their services – Mortgage Brokers and Bankers. They can have one office that covers several states or the whole country, so their cost to make loans wholesale vs. retail is substantially less! This is how you can go to a broker and get a better deal than going straight to the Gorilla – but you better make sure you got the RIGHT broker. You know as well as I do, the wrong person (even at the right bank!) can lead you down that frustrating road to pulling your hair out and not getting what you signed up for!

Back for a moment to the issue of no house closing costs. How is this possible? Most of the time people pay house closing costs when they get a mortgage right? Most of the time they do indeed, there are costs that must be paid in order to have a new mortgage close. Appraisals, State Taxes, Title Insurance, etc. Many borrowers do not realize they have a choice in this matter. Most lenders (whether their representatives are aware of it or not) can deliver a no closing cost refinance to a quality borrower. When lenders and banks deliver a long term loan to a borrower and the rate is fixed, the lender earns money depending on what rate is delivered to the borrower at closing.

Lenders and banks typically have the option to raise the interest rate charged in order to receive higher compensation from the end investor in the loan – this money can be used to pay the house closing costs on the borrowers behalf. In Florida, on a typical loan, you could probably accept about .5% higher in your interest rate for the option of having the lender pay all of your house closing costs (even less in other states). This is an excellent strategy for people who do not plan on staying in a property for a long period of time. The other time that it can be good to take advantage of this is when interest rates are declining. If rates decline and you have not paid house closing costs, then there is no reason not to refinance again for no costs (assuming you have no pre-payment penalty). People have done this multiple times over a period of months or years under the right circumstances. Amazingly, not all lenders or mortgage professionals are aware of how to do this.

We have a shoppers guide to selecting the right Mortgage Professional that every consumer should have in their hands before shopping for a loan. Most people make some crucial mistakes in the process that they could well avoid with this information.

house closing costs

First-time home buyers are sometimes surprised by the many house closing costs. A good Realtor will inform their client that they will pay about 2.5 percent of the price of the home for house closing costs. This amount may be as high as 3 percent or more in some circumstances.

Loan applicants must ask the lender for a Good Faith Estimate (GFE). Responsible lenders normally give you a GFE at the time of application. Regulations oblige lenders to disclose estimated house closing costs and the Annual Percentage Rate within three days of the application. Loan contingencies vary and sometimes small changes will occur after the initial application.

Closing Costs Determined on Your Chosen Financing Option

Lenders propose several options for fees. One option is a “No Cost” loan. These loans are offered at a higher interest rate than traditional loans; basically your house closing costs are included in your loan by the higher rate. Another option long-term buyers prefer is buying your interest rate down through points. Buying a point is one percent of the cost of the loan and typically equals a .125 lower interest rate. Decide your priority. First-time buyers are usually concerned about beginning costs.

Typical Closing Costs Checklist

Generally, a lender will charge an origination fee that can be one percent of your loan amounts as well as a processing fee. Processing fees begin at $350 and go up from there. If you are working with a mortgage broker, there may be bank closing fees too, including an underwriting fee and a doc preparation fee. These fees will generally total between $600 and $900. There are also title fees, title insurance fees, inspection fees and an appraisal fee. Title fees will vary depending on loan amount. Appraisal fees can cost approximately $350 or more. Since all of these fees can vary so much, the GFE is crucial.

Payments for Taxes, Prepaid Interest and Insurance are Deposited in Escrow

To procure financing for your new home, you are required to buy homeowner’s insurance. The first year’s premium will be paid at closing. The lender may require one or two months’ interest at closing as well, since you have about a month of grace before your first mortgage payment is due. The later in the month you close on your home, the less interest you pay at closing. Depending upon the time of year you purchase and what property taxes have already been paid for the year, they will also collect four to nine months of property tax at closing.

Again, in order to prepare for house closing costs, smart buyers refer to their Good Faith Estimate.

house closing costs

Many first-time home buyers do not know what to expect at a house closing. You should know that you are going to need more cash than just your down payment. When you submit your application for you loan, your lending institution will give you a Good Faith Estimate which will inform you fairly closely what the house closing costs will be and you can prepare accordingly.

A good way to be prepared for the house closing is to ask for a good faith estimate (GFE) once your application is in. By law, lenders have to tell you what they estimate house closing costs will be, as well as your annual percentage rate (APR) within three days of your applications submission. Subsequent negotiations and adjustments will probably alter the cost slightly after the first application, but you still have a right to know how much it will cost.

First Time Home Buyers May Have Fewer Choices

Most lenders have at least a couple of different options for fee payment. Some institutions offer a “no cost” loan that allows you to purchase a home with little or no out-of-pocket cost, which is attractive to first-time buyers. Be warned that you will have a higher interest rate than the average mortgage borrower. You also have the option to put more money down through buying points and therefore lower your interest rate. Shopping around for the best rate is ideal if you have the leisure time and resources, but many first-time home buyers are more concerned with coming up with house closing costs. Discussing options in detail with your lender will provide you with the most valuable information.

Educate Yourself in the Purchase Process

Lenders may charge a one percent origination fee in addition to a processing fee. This processing fee can range from a few hundred to thousands of dollars. If you are using a mortgage broker, there will also be bank fees. Some of these bank fees include items like an underwriting fee or a “doc prep” fee, and usually runs between $600 and $995. When your lender gives you a GFE, it will have title fees and appraisal costs itemized as well. These fees will vary directly depending on the loan amount, and are usually between $1,000 and $2,000. An appraisal fee starts at $350. With the number of varying factors at play when purchasing a home, getting a GFE from your loan officer is essential to the process.

Tax, Prepaid Interest and Insurance Payments are Placed into an Escrow Account

Financing fees are only one part of the house closing costs. To make sure you get funding for your home purchase, you must have proof of insurance as well as one year’s worth of insurance premiums. In this way you will have secured your investment along with the banks. Tax on your new home and any prorated interest will be tacked onto the house closing costs.

Just to repeat, make sure that you are on top of all the house closing costs, so that there won’t be any embarrassing surprises at your house closing.

house closing costs

There are many factors that go into home building costs and it can be huge task to even come out with an estimate.

The quickest way to estimate home building costs is to find similar houses in the area that has the same overall look and size of one that you want to build. Then take the selling price, minus the cost of the land and you will have a rough and quick estimate of the construction cost. This is, of course not an exact science, but by following this basic rule you will be able to get a rough estimate.

If the house that you are comparing with was built a few years ago, then you should factor in the appreciation cost due to increase in the cost of labor and materials at between 2 to 5% per annum.

Home building costs can be further influence by the interior feature of the home. Let’s say you want a completely furnished basement and the house than you are using as a reference does not. You should factor this into the cost estimate. A little here and there can add up to thousands of dollars.

Another way is to seek the help of a construction company. If you show them the type of house that you are interested in they should be able to respond to you with a quick estimate. Usually, due to expertise and experience, their estimate can be quite close to the actual building cost.

What if the house that you plan to build is different from what is available in your vicinity? Here is a tip. Go online and type in the terms ‘home plans’ or ‘house plans’. You will find many sites that offer thousands of house plans. You can search by type, size, number of rooms etc and for a small price you can download the blueprint. Then ask your friendly construction company to give you an estimate.

Yet another way is to use home building kits. Again go online and type in ‘home building kits’. There are many companies offering home building kits than contains everything (except labor) that you need to build a house. Then ask your construction company to quote for labor charges. Labor charges constitute a significant portion of the cost of building your own home and if you have the expertise, using a home building kit and building it yourself can reduce your estimate significantly.

No matter how precise or detail oriented you are in the planning stages, you must keep in that there may be an unexpected cost overrun. It is a safe practice to put away about 10 or even 15 % for contingency to ensure that you have the money to cover any overrun.

Home building costs can often times be very difficult to pinpoint. But if you use some of the methods described above, and by being precise and detail oriented, you will be able to come up with a very close estimate on your home building costs.

house closing costs