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House Closing Costs

House Closing Costs When Refinancing

The question many of us are asking these days is whether to refinance our mortgage, or wait for better terms or a better rate. While no one can accurately forecast where rates are headed, there are some steps you can take that will help you decide whether to refinance your mortgage now:

First: How much lower are the rates than what you are paying on your existing mortgage? Keeping in mind, especially if you are writing off some mortgage interest on your taxes, that a slight drop in rates may not make it worthwhile to refinance.

Second: If the rate is significantly lower, you may want to check what your monthly savings will be. When doing this, make sure you calculate the new mortgage payment after your refinance without factoring in any years you are adding on to the end. For example, if you owe 27 more years on your current mortgage, calculate your new payment using the new rate and the amount you are refinancing only over 27 years. Otherwise you might think you are lowering your payment more than you actually are, when you are really just adding years onto the end.

Third: So now you know how much you’d save each month on a refinance, but how much are the house closing costs going to be for your refinance? You need to be sure that paying any house closing costs (including points) are worthwhile. Here’s some simple math: If you are paying $2500 in house closing costs, and the reduced rate saves you $500 each year, you’ll need to stay where you are for five years to reap the benefits. For many, house closing costs are worthwhile, but for others who know they will need to upgrade, or have a job situation that can mean having to move, house closing costs may eliminate any benefit of the refinanced mortgage.

Fourth: If you’ve arrived here, you have probably figured that you are saving enough over time to make your new rate and the house closing costs worth moving forward. One last consideration: Do you think you will refinance again? This one may be close to impossible to answer easily, because who knows where rates are going. But, if you think they might go down, make sure you know what your lender’s terms are as far as refinancing. Some lenders will not refinance a mortgage for 90 days after the close of the one you are doing now. Make sure you are getting enough savings to not worry about that.

Fifth, and finally: One last word of caution: Once you lock you may have to pay fees (e.g. for an appraisal) that might not be recoverable if the loan does not go through. One of the biggest issues you could run into is that your appraisal is not high enough to qualify you for the mortgage. You may want to carefully look at comparable sales in your neighborhood, or, even better, talk to someone who is aware of the real estate market in your area, to be sure that your home will be appraised at a high enough value to meet the criteria of your loan.

If you’ve made it this far, you may be inclined to go forward and refinance. Best of luck! Information in this article should not take the place of a conversation with a finance and possible tax professional who is aware of your unique situation.

house closing costs

Preparing to Buy a Home – House Closing Costs

When purchasing a home, one of the first and most important steps you will want to take in beginning of the home-buying process is speaking with a lender. There are many beneficial reasons for doing this.

First, it will ensure you are looking at homes that are in your price range and that work for your budget. Nothing is more disappointing then falling in love with a house that you can’t afford.

Second, the lender can provide a pre-qualification or pre-approval letter, which will give you more bargaining power when submitting your offer to the seller. The owners will see that you are qualified and financially prepared to buy the house and, as a result, the sellers may be willing to accept a lower offer knowing you are financially ready to purchase their home.

Lastly, you will want to find out from your lender how much you should expect to pay in house closing costs. This information will also be given to you in a good faith estimate provided by your mortgage lender.  In addition to house closing costs, you will want to ensure you have earnest money to accompany the contract along with additional funds for any inspections that you choose to have. It is important to know all of the costs involved when purchasing a home so that you are financially prepared.

Working with a lender who is local to the area where you are purchasing the home is always a good idea as opposed to someone in another city or state. The local lender is typically more familiar with the area which can often lead to having a smoother transaction. There are many local mortgage bankers in the Jackson Hole area that have years of experience assisting their clients in purchasing the perfect home.

Once you’ve been pre-approved, you will then want to determine what area or subdivision best fits your needs. A great way to determine this is to take a drive through the different neighborhoods of Jackson Hole with your real estate agent, so that you can see what each area has to offer. For example: It may be important for your children to be close to school or for you or your spouse to be close to work. Once you have determined the price range you need to stay in and what area best fits your needs, have your real estate agent email you listings that match your criteria as soon as they hit the market.

house closing

Closing on Your New Home

A lot has to happen before you can close on a new home successfully. Some of it is your responsibility, and some of it belongs to others. But don’t expect it to happen overnight or perfectly smoothly. There are too many factors involved. And there’s a lot of money riding on the deal, too—not all of it yours. So the wisest thing to do is take care of everything at your end; dot every “i” and cross every “t” that you can from your end of things. And be picky, picky, picky about who you’re doing business with; from the get-go, choose only the most experienced, successful professionals and companies that you can find. They have what it takes to make the long, complicated process considerably more bearable. For example, if it’s possible, it’s a good idea to go with a Texas-based lender, because of Texas real estate laws, some of which differ from that of some other states. An out-of-state lender might make some mistaken assumptions that could add to delays.

For most homebuyers, pre-qualifying for a home loan and signing a contract are major steps. But that’s just the beginning of the journey towards home ownership. And the rest of the trip can sometimes make or break the deal. It’s during this period that the lender is trying to complete the financial package, the title company is doing the necessary research, surveys and appraisals are put into motion, and the homebuyer orders home inspections and obtain homeowners insurance. Anything that goes wrong at any of these stages could mean delays—or even a broken deal.

As a homebuyer, you need to know that pre-qualifying for a mortgage loan—and actually qualifying for it—are two very different things. You also need to know that the difference between the two can definitely affect the closing date. To get pre-qualified, a homebuyer must meet with the lender and have essential information (Social Security number, income, etc. at hand). Then, after checking your credit score, income, and employment, the mortgage lender writes up a document—based upon this preliminary information—that states what size of loan you might qualify for. Remember, this is not a final conclusion or a mortgage loan approval—it’s really only the lender’s “educated guess”—so don’t start counting your chickens just yet! As a matter of fact, many lenders these days are encouraging homebuyers to skip pre-qualification and go directly to qualification—before they start looking at homes—or, in many cases, even before the contract is signed.

That’s because the actual qualification process is much, much more extensive and in-depth. Typically, it involves giving the lender accurate information, W2 forms, bank statements, tax returns, and proof of income. All this goes through the lender’s approval process, which can take a fair amount of time. That’s because the up-to-date accuracy of the information you’ve given them is checked and double-checked at this time. So be sure of your facts and figures, because any errors, inconsistencies, credit problems, or misinformation could definitely put a damper on things at this point.

Things a homebuyer should know. Or expect. Or do.

* Lenders should give buyers a good-faith estimate of how much money to bring in—by certified check—to the closing. Closing costs typically run about 3 to 6 percent of the loan amount.

* One business day before closing, you have the right to inspect the Uniform Settlement Statement. This itemizes the costs of all services you must pay at closing.

* The lender is also responsible for giving you a truth-in-lending statement that states all the details about the cost of the loan.

* The title company’s job is to research public records and verify that the buyer and the seller don’t have any lawsuits, liens, or judgments against them or the property.

* One of the real estate agent’s jobs is to stay in contact with the title company during the research phase, just to make sure that any problems that might surface are dealt with promptly. It’s important to avoid last-minute surprises, which could lead to delays on closing.

* Before closing, the smart homebuyer should order inspections on the house and property to make sure that everything is in good shape and that no major repairs are required. Repairs could change the agreed-upon price in the contract. The homebuyer should be there with the inspector when it’s done. Why? Because an inspector’s report can be 10-12 pages long and full of technical jargon, so being there to ask questions and get on-the-spot explanations can really help you get a grip on the situation. The cost of an inspection can vary; it depends on the location of the house, the size of the house, and what kind of foundation it has. By the way, a termite inspection also needs to be ordered by the homebuyer before the closing. If an inspector is not certified in this area, another inspector will have to be hired.

* Homebuyers are responsible for getting homeowners insurance and have proof of it at closing. The Texas Department of Insurance says buyers should expect to pay about $400 to $1,000 a year for insurance—and possibly even more if the home is in a flood zone. Most lenders will recommend an escrow account where funds for insurance and property taxes are automatically set aside each month.

* The lender will require hazard and liability insurance for at least the amount of the loan. At the closing, you’ll be expected to pay the first year’s premium for this insurance.

* The homebuyer should schedule a final walk-through of the house right before the closing. It would be a good idea to do the walk-through with your real estate agent. You want to make sure that the house is in the condition that you agreed upon in the contract. Remember, once the closing is done, you’re the owner of the house—as is. You no longer have any legal power to get the seller to fix anything, and the seller no longer has any legal responsibility to do so.

* A settlement agent—usually the title insurance company—is the one who usually sets the time and place of closing.

house closing costs

House Closing Costs – What to Expect

Don’t just assume that the price of a home that you agree on with a seller is the end of the road as far as costs! Like so many other purchases, buying a home will mean that there are additional costs associated outside of the actual retail price. These are usually due at the end of the buying process, before a deal is struck with the lending company, and are known as “house closing costs”. Here are a few of the most typical.

Points

Points are equal to one percent of the total amount of a loan. If you buy a home worth $300,000, then one point would be $3,000. The decision to buy points is made right before the mortgage is closed, as the number of points you opt for will directly affect the amount of money you pay each month for the mortgage.

There are two types of points, discount and origination fees. Origination fees are charged by the lender in order to cover the cost of the loan. Discount points are prepaid interest amounts and will reduce the dollar amount you pay each month on the interest on your loan, and therefore your total payment amount.

Home Insurance

If a house is destroyed by fire or act of God, the mortgage company stands to lose the most; after all, the money is still owed to them and with no way to recover the loan through the sale of the home they will take the hit. For that reason, lenders will insist that you purchase home insurance before they approve the mortgage. This insurance must be renewed each year according to almost all contracts.

Title Insurance

Every once in a while a home owner and their mortgage lender will get a nasty surprise in the form of another person with a lien on the property. In effect this person claims that the property is theirs, and that the person who sold it to the buyer had no right to do so. Title insurance, like home insurance, will mean that both the lender and the buyer are protected against undisclosed liens.

Surveys and Inspections

Lenders will also typically request an inspection of the home and/or a survey of the property in order to ensure that everything is still within the original boundaries. Appraisal fees, to determine if the property has been valued appropriately (directly related to recovery in the event of a resale) are also an added cost.

So as you can see, when looking to purchase a new home, you must also consider the additional costs associated with the purchase.

house closing costs

House Closing Costs Can Be Shocking

There are a lot of people who go for a mortgage without understanding some basic fundamentals about mortgages. On top of that, they hire mortgage brokers who are good for nothing). Though mortgages (especially first mortgages) are an emotional thing (on account of the joy of being able to get into your own home), one must not forget that you are going to spend a lot of your hard earned money on fulfilling your mortgage obligations. These are not just in terms of the monthly mortgage payments but also in terms of the down payments and other house closing costs.

So, if your mortgage house closing costs shocked you, it must be because you didn’t calculate these costs properly. Closing costs can sometimes cause a lot of discomfort. Some people forget to include the house closing costs altogether (you can take comfort from the fact that you had at least considered the house closing costs for your mortgage). Such people are in for an even bigger shock than what you got for your  mortgage. Besides payments and other fees, the house closing costs also include pre-interest charges that are calculated by the mortgage lender as the interest from the day your  mortgage was recorded till the end of the month. That means that closing your  mortgage towards the month end would have made much more sense (and averted that shock that you received through your  mortgage house closing costs).

So, evaluate your house closing costs properly.

house closing costs

House Closing Process – House Appraisal Costs

The actual house closing process is quite the involved undertaking. Typical home buyers do not really know how much goes into the closing of a home beyond the signing of the contracts. Usually the Realtor sees to most of the closing concerns but its a good idea to educate yourself so that you understand your rights regarding the transfer of title and closing of the actual sale. There is a huge amount of paperwork involved in home closing so you will want to have a checklist to ensure that you have everything. The items will look like this:  house appraisal report, home inspection report, proof of the title search, good faith estimate, and the actual contract itself.

As the buyer you have a few responsibilities and an entitlement or two. Of course these are all defined by the contract and the parameters of the offer & acceptance. It’s important to make sure every aspect of the sale is recorded in detail and in writing. Any subjects must be signed off on by both the buyer and seller, this includes anything that is or is not included in the sale. So be clear about what you expect to be included in the deal. Most importantly this is the part of the process where the final version of the contract gets signed by both parties. This will finalize the transfer of the home, leaving only the payment of escrow items and house closing costs outstanding.

The actual house closing happens when all concerned parties gather to finalize the contract. Usually it is quite the gathering, including representatives of the buyer, seller and mortgage provider, title provider, attorneys and so on. This is where the actual finalization and payment of outstanding costs occurs. The end result being that you are deeded free and clear title to the property in question. If you pay close attention to all the steps involved in the process it can be a highly educational process as well as highly rewarding.

house closing costs

You Can Sell Your Own Home


Are you willing to trade time and effort to save thousands of dollars? The average fee real estate agents charge to help you sell your house is 6% of the purchase price. That can be a lot of money on top of other preparation and house closing costs. If you are willing to spend time collecting some information, learning how to advertise your property for sale, conducting open houses, and escorting visitors, you can sell your own home without a real estate agent.

Numbers you need to know when you want to sell your own home

Selling your own home is a financial and legal enterprise. Four numbers will help you assess the financial side:

• What do you owe?

• What is your home worth?

• What can you sell your home for?

• What house closing costs should you expect?

To find out what you owe on your house, contact your mortgage company and request a payoff statement. This amount is the most current information on how much you owe on your home. The information on your monthly mortgage payment or your annual mortgage statement will be a close approximation of the amount owed. Your county records office will have information on any liens against your property which must be paid off before the deed can be transferred to the buyer.

The web is a great help in determining what your home is worth. For most houses in the U.S., you can go to Yahoo Real Estate and type in your address. You will get a brief description and an approximate value. Zillow also offers a free home value estimate calculator. The home values offered from these sites are approximate, but they give you an excellent starting point in setting an asking price when you want to sell your own home.

What you can sell your home for is a bit different from the value estimates. Remember that your home is worth what someone is willing to pay for it. In figuring out what you can sell your home for, you need to know what makes a house attractive to buyers, what discourages a potential buyer, what the current market conditions are, and you should decide how quickly you want to sell your home.

Closing costs are the final fees involved in transferring the title of your home to the buyer. Who pays these costs is negotiable, but you need to have a good idea of what they will be and factor that information into your decision on asking price. According to Bank Rate.com, average house closing costs are around $3,000. This total includes lender, title and settlement fees, but does not include county recording fees or other costs such as homeowners insurance, property taxes, homeowner association dues or prorated mortgage payments.

Getting your home ready to sell

Image of Home Staging For Dummies

Click on the image above to see book details.

The key requirements to get your home ready to sell are: clean, de-cluttered and fixed. Buyers make their decision based on first impressions. Real estate agents talk about curb appeal – what does your home feel like when someone drives up and walks-in. So making a small investment in landscaping can pay off in attracting buyers. Clean means everything – inside and outside of the house. To de-clutter your house, you may need to put some items into storage in order to have your rooms appear open and inviting. You should remove small items off tables such as photos and knickknacks, and keep the counters clear. You want the potential buyer to be able to see their family’s stuff in the house and that is easier for them to do when the space is de-cluttered of your stuff.

Unless you are planning to sell your home as a fixer-upper, you need to do the fixing first. Contracts for home sales give the buyer the right to inspect the property, so you are ahead of the game if you do the inspection first and make any necessary repairs. Before a sale for your house can be completed, a legally binding disclosure form is signed by both parties. Therefore, your inspection should include general condition and any items required by federal and state law to be formally disclosed. Be aware: Failure to disclose is the grist for law suits and damage awards.

Attracting buyers

You can inform potential buyers that you are selling your home through local classified advertising, word-of-mouth, and yard “For Sale by Owner” signs. But far and away the most effective way to advertise that your home is for sale is by listing it on the Multiple Listing Service (MLS). You can see examples of homes for sale in your area at the Realtor.com site. Once the purview of licensed realtors, individuals can now list their home for sale on MLS with the help of Iggyhouse.

To list your home for sale you need to collect basic information on size and features. You need good pictures of the outside of the house and each clean, de-cluttered room. You should write a brief description using keywords that buyers like such as: gourmet kitchen, granite counters, exceptional schools, professional landscaping, near lake or golf course, or ready to move-in. In the details of the listing, add information on room sizes and interior and exterior features. Print copies of the final write-up in color and make those available next to your yard sign and for handing out to visitors and open house attendees.

When a prospective buyer visits your home for sale either by appointment or attending an open house, be ready. Pickup and spot clean all surfaces. Even though you live there along with your children and pets, the house needs to appear empty. If you remain in the house during the visit, give the buyers plenty of privacy to look around. Your children and pets should be somewhere else. If you have time, add some fresh flowers or scented potpourri to create a nice ambience. If you host an open house, be sure to have a sign-in sheet for follow up contact and it is wise to remove your small valuables from sight.

When buyers are serious – finalizing the sale of your home

There may be offers and counter-offers and lots of discussion, but when it is time to actually make the sale, it is also time to get the professionals involved. You need a lawyer to construct the sale documents, you need to create and jointly sign disclosure agreements, and the buyer’s lender will want title searches, appraisals, surveys and verifications. Although you saved thousands of dollars in agent fees, the closing is not the time to save money. Having professionals involved in the document preparation and signing protects you and the buyer.

house closing costs

No Cost Mortgage – a Real Deal or Not?

In 2008 we saw mortgage interest rates begin to fall. When mortgage rates fall, misleading mortgage advertising schemes seem to show up in the media all around us. For example, I recently watched an advertisement on Television for “The Real No Cost Mortgage”. I shudder each time I see or hear advertising about this type of mortgage because it is misleading and deceptive. The sadness in this for me as a 12 year mortgage broker veteran is that this type of advertising is indicative the bad apples that contributed to a great degree to the mortgage industry meltdown in 2007. I am going to say it right off the bat: There Are No “No Cost Mortgages” on the Planet!” Is this clear? All mortgages have costs associated with them. This is the end of the story.

Most “no cost mortgage” loan programs are designed the same way: the interest rate of your loan is increased to cover the costs associated with your mortgage. There are a select few mortgages that have very little costs associated with them: these are home equity lines of credit – or HELOCS. Often you can get these little or no cost loans at your local credit union or small community bank. Additionally, these loans typically only allow you borrow up to about 90% of your home’s value. Credit Unions are small enough that they perhaps can offer to pay some of your costs as a courtesy to earn your business. The larger banks simply cannot pay or give you these costs for free or it would set them back a few dollars.

With these small second mortgages and HELOCS aside, the rest of the mortgage market is primarily made up of larger first mortgages. As I previously stated, these mortgages have costs associated with them such as: paying a processor to process your loan, the cost for an appraisal, the underwriter, the title insurance policy, your credit report, tax and insurance escrows, and of course the money that your loan officer makes in commission. All of these fees in one form or another get paid, and guess who pays them? That’s right, you do. You will pay these fees one way or another.

So what is the catch to this type of advertising? As I previous pointed out, the mortgage company charges you a higher interest rate. If you are paying a higher interest rate, then your monthly payment is higher. So your higher payment month after month pays your house closing costs over time. Now, this is not necessarily a bad thing if you know what you are getting into. Where I have a beef with this type of advertising is that it is not telling you the whole truth. You do have house closing costs and the mortgage company is charging you a higher interest rate to compensate for those fees – and they do not tell you this in the advertising. They lead you down some fantasy of a no cost mortgage, or a free mortgage, and ultimately charge you a higher interest rate than you would normally get if you paid your costs either with your loan proceeds in a refinance or out of your pocket in a purchase mortgage. The misleading advertising got you to call them.

Initially, this loan can be good if you are low on cash. Hey, it is not a bad loan in the short term. Let’s just say that the interest rate that they charge you increases your monthly payment $150 a month for a no cost mortgage. After 30 months, or 2.5 years you have paid $4,500 extra. What if that was the amount of your house closing costs when you first got the deal? Well, for the first 30 months you saved money and were better off. However, once you hit month 31, you are now paying more for your mortgage’s house closing costs than you would have if you had paid them up front when you got the mortgage.

Another thing to be careful about with this type of mortgage is that it is very easy for a mortgage company to charge you more than might have been able to charge you because their profit is made in the interest rate and in the slightly higher interest rates. With this said, it is hard to tell how much a mortgage company makes on your loan given your payment increases slightly over what you could have been paying if you had paid your own house closing costs.

So, the next time you hear of this kind of mortgage program, make sure you ask about the difference in your monthly payment between paying your own house closing costs, or for paying a higher interest rate. If you know you are only going to be in the home for a few years and then you are going to sell the home, then a no closing cost mortgage might good for you. If you are planning on staying longer and you know you are going to refinance in the near future, then this loan might be good for you too. But, if you do not want to refinance in the future, or be forced to have to refinance to get out of a no cost mortgage when it starts costing you money then the no cost mortgage probably is not right for you. Make sure you take a look at all your options. Do not let a slick mortgage person tell you that this loan saves you money – as this is not necessarily the case.

Affordable House Closing Costs with an FHA Loan

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.

Closing On Your Home

Reduce Your House Closing Costs

Many first-time home buyers are dismayed at the sudden appearance of house closing costs that seem to come from every conceivable avenue. They also can be beset by fees that seem to have no real explanation and cost them hundreds of dollars. Many people accept this as part of closing a real estate deal, but if you want to save as much money as possible, you will want to carefully evaluate each fee and find out which ones can be waived or eliminated.

Attitude and knowledge are your biggest weapons when dealing with lenders. Be polite at all times, but pretend that this is the 50th home you’re going to buy and you’re just doing it because you’re bored. You don’t need this home or this lender. You bought 10 homes last week. You just sold a dozen. Let the lender know by your attitude that you’re not so heavily invested in this home that you can’t walk away if your questions aren’t answered or your needs not met. Be prepared to do just that; many lenders have been used to buyers who will spend several thousand dollars more than they have to in order to buy a home. If you can find one lender, you can find another and it’s better to wait than to go with a lender who is not going to treat you properly.

There are a number of fees that can be reduced or completely waived for the savvy home buyer. Among them can hide “junk” or “garbage” fees, which are tacked on to the overall costs merely to make money for the lender. Things like “settlement fees” “underwriting fees” “messenger fees” are examples of fees that are soley there to provide profit for the lender. Learn the more common terms and ask for these fees to be waived.

Third party fees, such as appraisal, attorney fees, credit report, title insurance and title search are generally non-negotiable, as the lender has nothing to do with how much the third party charges. However, when searching for a lender, keep a record of how much is charged for each service and ask why if there is a drastic difference between one lender’s charge for a service and another’s.

Remember that you can walk away from your mortgage at any time. Even if it would cost you to do so, take this attitude in your dealings with your lender. If a fee is unexplained or too high, call them on it. You don’t have to be rude or hold it over their head like a guillotene, just don’t be so desperate to buy that you end up giving more money than you need to.

House Closing Costs

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