House Closing

Introduction to Mortgage Refinancing:

A mortgage refinance is the process of taking out a new loan, and using the proceeds to pay off your old one. Generally, you’d do this to make a change in the structure of your debt in order to get more money, a lower monthly payment, or a shorter pay-off schedule.

Why refinance?
You’d trade-up your mortgage for the same reason that you’d trade-up your job, car, or living arrangement-because circumstances change. What you need out of a mortgage today may be different from what you needed five years ago. Refinancing can achieve one or more of the following objectives: 1. Lower your monthly payment. You can reduce your monthly payment by refinancing to a lower interest rate. Have market rates dropped since your old mortgage was funded? Has your credit improved? Has your home increased in value? Any one of these happenings could mean that you’d qualify for a lower rate. 2. Shorten your pay-off term. Paying off your mortgage loan in 15 years rather than in 25 can save you tens of thousands of dollars in interest over the life of the loan. If you can afford the higher monthly payment and plan to stay in the home indefinitely, it’s well worth it. 3. Optimize your loan structure. Your current loan structure may no longer be suitable for you in the future. Maybe you bought your home with an adjustable-rate mortgage (ARM) and your initial fixed-interest period is about to expire. Perhaps you have a fixed-rate mortgage, but you’d like to take advantage of the more flexible option ARM. Discuss your objectives with your lender to determine the most appropriate loan structure for you. 4. Consolidate your debt. If you’re carrying a lot of credit card debt, you can lower your monthly repayments through consolidation. To do this, you’d take out a mortgage loan large enough to pay off all the debts on your cards plus the balance on your old mortgage. 5. Fund large, one-time expenses. You can raise the funds you need by doing what’s called a cash-out refinance, where you’d take out a loan that’s larger than your current one. As soon as you pay off the old loan, the excess funds can be used to pay for home improvement projects, college tuition, your daughter’s wedding, long-term care expenses, etc. Essentially, your mortgage is a financial tool that might need occasional sharpening. As life throws you new circumstances, trading up that mortgage may be one way to manage change.

Tax Advantages of Refinancing:

Saving on taxes:
As an existing mortgage borrower, you already know that your mortgage interest is tax deductible. You may also know that you pay far more interest in the early years of a mortgage than you do later on. And the more interest you pay, the higher your deduction. Replacing your current mortgage loan with a refinance might lower your tax liability. And if you intend to use the refinance to consolidate credit card debt, the benefits would be even greater, because you’d be replacing non-deductible credit card interest with tax-deductible mortgage interest.

Tax deductions and refinancing:

The IRS designates two types of mortgage debt: home acquisition debt, and home equity debt. Home acquisition debt is what you paid to buy the house. When you refinance, the amount of the new loan used to pay off the old loan qualifies as home acquisition debt. Any amount over that would be home equity debt. The following example will help clarify the point: • Suppose Jenny owes $200,000 on her mortgage. She takes out a new mortgage for $225,000 and pays off her old mortgage. For tax purposes, $200,000 is home acquisition debt, and the remaining $25,000 is home equity debt.Interest paid on home acquisition debt is generally tax deductible in its entirety. You can also deduct interest paid on the first $100,000 of home equity debt.

Refinance or Second Mortgage?

Understanding your options:

1:Lower your monthly payment

2:Shorten your pay-off term

3:Optimize your loan structure

4:Consolidate your debt

5:Fund large, one-time expenses

The first three can only be accomplished with a refinance. The last two-consolidating debt and funding one-time expenses-can be accomplished with either a refinance or a second mortgage. To decide between a refinance and a second mortgage, compare your mortgage interest rate with current market rates. If you’re paying more than what’s available, a refinance will lower your overall interest costs. If you’re paying less, a second mortgage might be the better option. When the two rates are roughly comparable, many borrowers prefer the efficiency of a refinance-one loan, one monthly payment. It’s also worth noting that refinance loans generally carry lower interest rates than second mortgages. You cannot, unfortunately, take your new debt for a test drive before signing up. Therein lies the importance of making informed decisions; refinancing your mortgage every year, after all, can get expensive. That leads us to the next topic: house closing costs.

Closing Costs and Refinance Risks:

1:Application Fee

2:Loan Origination Fee

3:Discount Points

4:Appraisal Fee

5:Title Search Fee

6:Title Insurance Fee

7:Prepayment Penalty on Existing Mortgage

The first three listed above are within your lender’s control; the others are not. If you have great credit, you might be able to negotiate lower application fees, loan fees, and discount points. Be cautious if a lender offers to cover your house closing costs; this may mean you’ll be charged a higher interest rate. Closing costs have been known to change at the last possible moment. Your best protection against unpleasant surprises is to request a written estimate. Also find out what the lender’s policy is on closing cost changes; some lenders guarantee their estimated costs, and others don’t. If you’re refinancing just to save money, be sure to weigh the house closing costs against your monthly savings. If the new loan saves you $50 monthly, but you have to shell out $1,200 in house closing costs, it will be two years before you break even.

Me and my wife are buying a new house. The house closing date is Oct 16. In the meantime we own a house that’s currently being sold to another couple and they have till Oct 30th to close which I am more than certain they will. We will be using the money we will get from selling our old house to put it down as 20% down to buy the new house. My question is, What can we do so the banks can maybe either push the closing date 2 weeks pass the scheduled time? or maybe show them the document that we will be selling our house in 15 days and to approve us a loan with 20% down. What can we DO? PLease help.

house closing

Often, people have heard of THDA and are confused, thinking that THDA is a certain loan type. In fact, it’s lending agency. All THDA mortgages must be insured by private mortgage insurance, FHA, VA or RECD And as these loans are intended for low to moderate income families or individuals, there is a income limit and acquisition cost limit. Also, you must be a first time homebuyer unless your home is in a targeted area.

Why is THDA so fantastic for a first time homebuyer? Well, it comes down to money. THDA offers a below market rate and will allow up to 100% financing. Have you been reading the papers lately? It’s not so easy to find 100% financing these days. Unless, that is, you’re a first time homebuyer. It also has programs that allow for down payment assistance via grants from certain approved agencies (if your loan type requires a down payment). If you have satisfactory credit and the home you wish to buy meets THDA’s standards, then you’re in business.

All THDA mortgages are 30 year fixed rate loans, so you needn’t worry about finding yourself with an ARM loan (adjustable rate mortgage) and a new payment you can’t afford in 3 years. And THDA allows lenders to only charge customers a standard 1% origination and .25% discount fee. It also closely monitors fees associated with the loan. THDA really looks out for the best interest of the first time homebuyer. If you are eligible for a THDA loan, you can feel pretty certain that an unscrupulous lender can’t take advantage of you because THDA won’t let them. For so many people, buying a home is pretty intimidating. THDA takes away the uncertainties a buyer faces with its guidelines and lending practices.

If you do apply for a THDA loan, be prepared to document your credit worthiness. THDA loans require slightly more documentation than your average loans because of the uniqueness of its product. In order to offer more, THDA asks for more – ensuring you qualify for its pretty awesome program. Sounds like a fair trade, if you ask me.

What are the disadvantages of a THDA loan? Not many. They do have a federal recapture tax if you sell your home within the first nine years of owning it. But it sounds scarier than it really is. I’ve heard that only about 1% of THDA customers actually pay this tax. That’s because a bunch of really great things have to happen to you in order for it to actually apply to you. And if those great things happen to you, paying the recapture tax won’t matter much to you anyway. I’ve been in the business for 16 years and have only heard of one person actually having to pay one. He graduated from medical school and his income when through the roof. His property was sold above market value than for the area because it was adjacent to some property that a huge retailer wanted to purchase. Again, good things have to happen to pay the recapture tax. So, you shouldn’t be afraid of it.

More people need to hear about and take advantage of the THDA loan programs. It’s such a great product and really helps the community and the housing industry. If you’re a first time homebuyer or think you’re in a targeted area, make sure you ask about THDA to see if you would qualify for a loan. You won’t regret it!

House Closing

A good house appraisal is the best reassurance that the lender won’t lose its pants on the transaction. If the borrower defaults, the lender still has a marketable property that can be sold to recoup its losses. All of which makes it understandable why lenders are so picky about appraisals. And with recent changes in the industry, the focus by lenders to obtain good appraisals is at the forefront.

House appraisals typically cost anywhere from $350 to $400. However, if the house is gigantic, multi-unit or in the boondocks, it could run more. The cost varies on property type, location and square footage.

The most common type of house appraisal is the Uniform Residential Appraisal Report (URAR). It consists of interior and exterior photos and sometimes (depending on the age of the home), a complete cost breakdown of the property and comps (comparison sales of homes nearby that meet the proper criteria). These comps help determine the “market” approach. Each comp sale is adjusted in value when stacked against the home being evaluated (the one you’re buying or refinancing). Usually you will see a comp below the value of your home, in line with the value of your home, and a third above the value of your home. Kind of like the three bears. But if the valuation gets tricky, you can see fourth, fifth and sixth comps. The net value of the comps is estimated based upon the approaches used to come up with the appraised value of your property (meaning the appraiser performs some type of calculation that’s kind of like an average, but not necessarily a true average. Confused yet?)

URARs also, typically but not always, reflect a cost approach, which determines what the value would be based upon what is estimated it would cost to rebuild the home, less depreciation. The final estimated value of the home is then determined by using a melding of the market approach described above and cost approach (if applicable).

Lori Babb, Staff Appraiser for Mortgage Investors Group of Knoxville, TN, further explains comparables. “The best comparables are those similar in size, style (ranch, basement rancher, 2 story, etc.), age, and are close in proximity to the dwelling being appraised,” she explains. “Unique properties will typically require more adjustments than the average properties.”

So, say you’re Bill Gates and want to secure a mortgage on a $200,000 home (I know, it’s ridiculous, but I’m trying to make a point). He’s got the best credit profile a lender could imagine, yet the house appraises for $175,000. Deal or no deal? You better believe it’s no deal. The sales price will have to be lowered, or Mr. Gates will just have to pay cash for his new home (you think he can afford it?). The point is, your average Joe won’t go ahead with the deal without a price adjustment, and he will be obligated to pay for the appraisal regardless of the outcome of value.

Dan Tyrell, principal of Knoxville area’s Tyrell Appraisal Service, Inc., has this comment about value, “When determining value of a single family house, beauty is more than ‘skin deep’. Fresh paint, new carpet, new appliances, and nice landscaping all enhance the marketability of a house. Not so obvious items also impact the appraised value of a house. For instance older houses that have replaced plumbing/electrical systems, updated HVAC systems, newer roofs, replacement windows, etc. lower the effective age of the property which in turn increases the appraised value.”

There are other types of appraisals that are not as common, like an Automated Valuation Model (or AVM). In this case, different factors combine to ensure the value of the home (it’s worth $200K, but your loan amount is only $100K) and your unbelievable credit worthiness (800 credit score!), allowing you to skip purchasing a typical appraisal. You may also only be required to get a “drive by” appraisal, where the appraiser just inspects the exterior of the subject for size, looks at the lot and makes you wonder who that person standing by your mailbox is.

Most lenders control what appraiser is used to determine the value of your home. After all, it’s their money on the line. The appraisal is such an important factor to the mortgage transaction – make sure you’re satisfied with the results. Your lender will make sure it is satisfied!

house appraisal for for closing

As a home buyer, what house closing documents do I get at a house closing?

Assuming no mortgage is involved, what house closing documents am I supposed to get at a real estate home / condo purchase closing?

What documents do I sign?

Which ones prove that I now own the property?

And if a wire transfer is involved, does the fact that the title / escrow company has disbursed funds to seller mean I know legally own the property and title is clear (title insurance bought) and title company has already recorded new owner with government agencies?

House Closing Documents

All lenders are particular about just who can give you a gift for your down payment or house closing costs.  Pretty much across the board, the gift must be from a blood relative.  You may have to prove that the gifter is a relative thru birth certificates, christening records, etc.  Strange but true.  Conventional loans will also allow an employer to give you a gift.  But in any case, the most important factor is that whoever is giving the gift does not expect to be paid back.  A certification to that effect will be required to be signed by the donor.  Otherwise, it’s really a loan, now isn’t it?  And as a responsible lender, we’re going to include that payment in your debt to income ratio, and we’ll probably want a bunch of documentation to prove the terms, etc.  So, make sure it truly is a gift.

Usually, FHA will allow for down payment assistance programs, such as Nehemiah or Ameridream.  Lenders view these products as “gifts” in a sense. They are basically seller concessions funneled through the down payment assistance channels.   However, by the time this article is published, they may be null and void.   It’s currently being reviewed and could go away.  Or it may still be there, but just know it’s under review.

Lenders are very particular about how the gift funds reach the closing table.  If you deposit the gift before closing, you have to show it coming out of the donor’s account and depositing into your account.  It’s a lot of paper to collect.  The easiest method is for Grandpa or your Great Aunt to just send a cashier’s check payable to you and your title company to the closing table.  Smoother, quicker, simpler.

Gifts are a wonderful thing, and a gift of a down payment is a useful gift.  After all, I think it’s safe to say that homeownership is one gift that keeps on giving, wouldn’t you?

house closing costs

After owner builders work their way through the maze of owner builder construction loan qualifying, it will be time to close on the loan. This is essentially where you sit down and sign a huge stack of documents that you will never read, or understand if you try.

Basically, this is where the owner builder loan promises to give you the money, and you promise to repay it. Sounds simple, but it will take a hundred or so pages to accomplish it.

Owner builders are typically free to choose any closing agent to conduct the closing. In most states, owner builders can choose either an attorney or a title company to perform this function. Some states require you to use an attorney.

Once you sign all the documents, the closing agent still must record them with the county registrar, making the owner builder construction loan official. This is usually the day after your signing.

During construction, as an owner builder requests specific loan draws, the lender will most likely request the closing agent to do periodic updates of the title to make sure no liens have been filed to date.

Most good owner builder construction loans are one-time-close, construction to permanent loans. Once you are finished building, there are no more closings to convert to your permanent mortgage. At this point most lenders simply send you a final loan agreement with the final loan amount and interest rate and terms for your signature. There should be no need to go back to the closing agent again for a second round of document signing if the owner builder loan is set up properly.

Owner builder loan house closing costs typically consist of three components: broker/lender fees, loan fees, and third party fees. Remember two things about house closing costs when considering owner builder financing.

First, house closing costs for construction loans, in general, and owner builder construction loans, especially, are going to be slightly higher than costs for a plain purchase or refinance mortgage. Accept this and shop for the loan that best fits your needs. Do not waste your time looking for an owner builder construction loan that has the same terms as the refinance loan you did two years ago. Do not try to compare apples to pineapples.

Second, just because an owner builder construction loan has slightly higher costs does not mean that it is not a great deal. Remember the big picture. You are considering being your own contractor to build the exact home of your dreams and save tens of thousands of dollars doing so.

If your research shows that you can save, for example, $65,000 by being an owner builder, is it no longer a great deal if you only save $63,000? How about $58,000? $53,000? Realize that you are still saving a ton of money while building your dream home, despite the slightly higher financing fees that come with owner builder loans.

Brokers earn their income on owner builder loans by charging origination fees for their service. This is a percentage, called “points,” of the loan amount. One point equals one percent of the loan amount. By charging an origination fee, the broker is able to give you access to a lender’s wholesale rates. The broker is also able to represent you and your best interests by offering access to a variety of loan programs.

Working directly with a lender is also occasionally an option. Direct lenders are typically compensated the same way as a broker; by charging points.

Perhaps the best option is working with an organization that has expertise in owner builder loans, that is a direct lender, and that also has the option of acting as a broker when needed. This will give you the best of both worlds while ensuring you are working with a specialist.

The number of points you should expect to pay will vary by loan program and lender. For very specialized loans such as owner builder construction loans, it is common to pay approximately two to three points in total fees. This is a small price to pay for access to a program that will allow you to save tens of thousands of dollars while building the home of your dreams.

In addition to broker or lender fees, your loan’s house closing costs will include loan fees. These fees include items such as underwriting, document preparation, draw administration, loan processing and a variety of the other small fees. For a construction to permanent loan (remember you are getting two closings in one), expect to pay approximately a half to one percent of your loan amount in total for these fees. Most of these fees are fixed amounts, so the percentage will be higher for lower loan amounts.

The third component of your owner builder house closing costs are made up of things the lender or broker has no control over, hence the name “third party” fees. Third party fees are also, for the most part, not affected by the type of loan you choose. They are, however, influenced by the size of the loan. Third party fees consist of your closing agent’s fees, title search and title insurance fees, recording fees to the state, county or locality and any state or local taxes. Most of these items are set by the state and local governments and are simply the price of buying or owning a home in that area.

All told, owner builders can reasonably expect to pay approximately two and a half to four percent of their construction loan amount in house closing costs. Some states may have high transfer taxes, excessive title insurance fees or other high state or local fees that will increase your costs.

Overall, the total house closing costs are not bad when you consider you are closing on two loans in one and being given a loan to undertake a process most lenders consider extremely risky. Plus, owner builders get to build their dream home while saving tens of thousands of dollars.

house closing costs<

Whether you are buying or selling, closing a sale can be costly. There is a lot to think about above and beyond what the mortgage payments will be.

Firstly, there’s the down payment. The more you can afford, the less your loan will be, but while the standard minimum required used to be about 10%, many new programs are available that allow the buyer to have only 0-5% down. Keep in mind that with no money down you will need to have an amazing credit rating and Private Mortgage Insurance (PMI) will be required. For the lending institution to determine your credit, you must pay a fee of around $50. A tax company may be contacted to verify that you have payed your taxes, and this is another roughly $75.

Sometimes there is a lenders fee, roughly 1-3% of the total loan, so talk to your loan agent about this. If you need the home you are buying appraised so that your loaning institution can determine the loan amount, this appraisal fee can be at least a few hundred dollars and sometimes as much as $1000. If you are assuming the sellers mortgage, there may be an assumption fee of a couple hundred dollars or up to 1% of the total loan amount.

Whether buying or selling, you may want the home to be inspected for various things. The advantage for sellers is that this is reassuring to buyers and can speed the selling process. The advantage for buyers is that they will then know exactly what they are getting, and their lending institution may require it before granting the loan, or as part of the market evaluation. Some examples of what may need inspecting are property inspections, including a check of the foundation, construction, plumbing and electrical system. These generally cost a few hundred dollars.

A roof inspection is often done separately for about $100 or less. If the area the home is located may be on a fault line or a landslide area, geological inspections are recommended. You may also want to have the home inspected for pests such as termites or carpenter ants, things that threaten the structural integrity of the home. This can generally run around $100 or more if the home is very large.

If the home is on a septic system, it is a good idea to get this checked as well. Septic inspections are surprisingly expensive, running at an average of a few hundred dollars. But imagine the alternative of discovering a problem after you’ve moved in.

If the home is older, testing for asbestos, radon or lead may be important. You want to ensure your home is as safe as possible for your family.

Then there are various insurance costs. In addition to mortgage insurance, you might consider extended title insurance. This covers any liens that may have been unrecorded, and may be required by lenders. It is based on a percentage of your loan amount.

Don’t forget the various taxes. Your municipality may have a tax based on the final price of the home. If you are a veteran you should be exempt from this tax.

While all of the prices listed above are relative, it is important to keep in mind that there will be extra fees associated with the closing process. If you are buying, you may be able to negotiate with your real estate agent to have the seller pay house closing costs. However there may be a limit that they are willing to pay, so make sure this is negotiated completely beforehand, and realize any inspections you decide to conduct after your negotiations will be at your expense. This is one reason for a thorough examination of the home before you make an offer.

house closing costs