House Closing

Due to the current down market, more and more people are looking for alternate, non-traditional ways to sell their home. The days of sticking a FSBO (For Sale By Owner) sign in the yard or simply listing it with the Realtor that your friend at work used, just isn’t having much effect these days. Depending on your selling situation, selling your home to a professional home buyer can be the right selling decision. As with other home selling options, selling your home to a real estate investor has benefits.

Working with an experienced investor can really simplify and expedite the process. Some of the great benefits of selling your house to a professional property buyer are: you are able to sell your house fast, “as is” on the date or your choice, you do not have to pay large real estate commissions to a Realtor, you do not have to spend your time, energy and money updating and making repairs and you only have to have one showing.

You may want to consider selling your house to a real estate investor if you are in any of the following selling situations…

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Most of us understand the advantages of owning a home versus renting one. However, we also know that it would be extremely challenging to arrange for the finances without some help. And so we decide to borrow money from banks and mortgage lenders, in order to full-fill our dream of owning our homes. Here is a guide to help you understand basic concepts of home loans:

Mortgage: A mortgage is basically the pledging of property to a creditor as security for the payment of a debt (Webster). Essentially, when you take the loan, you agree to let the lender hold the title to your house until the debt is completely paid off. You are also empowering the lender to sell your house in case you can’t make your mortgage payments.

Paying for your house includes arranging for the down payment, the mortgage payment (which consists of the principal, the interest, taxes, and insurance – referred to as PITI), and house closing costs.

Down payment: This is the lump sum you pay upfront – you are required to pay some of the money for the house from your own savings. The greater the amount you can arrange for the down payment, the lesser the amount you have to borrow – this translates to lower monthly installments. Typically, you need to arrange at least 3 to 5 percent of the purchase price on your own.

Principal: The total amount of money that you are borrowing from the lender is referred to as the principal. Usually the principal is the cost of the house minus the share that you are paying (down payment).

Interest: Why would the lender bother to lend you money? To earn interest, of course. The interest is basically an amount over and above the borrowed amount, that you are paying to the lender in monthly installments in addition to the principal you are returning. The interest rate is usually decided at the time of finalizing the mortgage arrangements – it can be fixed or variable.

Taxes: You are required to pay property taxes – the amount for this is often set-aside in an escrow account. What this means is that the money is placed in the hands of a third party until it is time to pay or certain conditions are met. A part of your property tax is added to your monthly mortgage payment. The amount is then held in escrow until it is due.

Insurance: Insurance can be of different types – hazard insurance (to protect against losses from fire, storms, theft), flood insurance (if you live in a flood risk zone), and then there is the private mortgage insurance or PMI that you will have to pay (if you have less than 20 percent equity in your home).

House Closing Costs: Besides the above mentioned costs, you will have to arrange for house closing costs. When closing on a house, the costs include loan origination fee, discount points, appraisal fee, title search, title insurance, survey, taxes, deed-recording fee and credit report charges. These costs are also known as ‘settlement costs’.

house closing costs

A home equity loan closing cost appeal usually carry a lower initial interest rate than a home equity loan, but its rate fluctuates according to the prime rate, so there is always more of an interest rate risk. Unlike a HEL, where your monthly payment is a set amount, a HELOC enables you to borrow funds as needed and repay as little as interest only each month.

When deciding between a Home Equity Loan against a Home Equity Line of Credit, first we need to determine what the money is being used for and how much money are we going to need. Generally, a HELOC (Home Equity Line of Credit) is a better choice for ongoing cash needs, such as college tuition payments or medical bills.

Home equity loan allows you to draw money whenever you need money, capped at a fixed limit. There is generally a minimum payment due each month, with the option to pay off as much of the line as you want. The two most popular types of home equity loans are called “open” and “closed.” The “open” loan or a line of credit sometimes called a HELOC.

In this loan usually the interest rate is variable tied to the prime rate and the term of the loan can range from five to thirty years. Because the rate is variable the payment amount is as well which might be problematic. Lenders often offer a special starting rate as an added enticement. The other type of loan is a “closed” loan where the amount is a fixed amount for a fixed period at a fixed rate with set payments so at the end of the term the loan is paid off much like a regular installment loan.

The rates and term of the loan are usually fixed but because the extra money is unsecured the rates are generally higher than a regular first or second mortgage rate but still lower than credit card rates. With a home equity loan, there are also house closing costs that you need to take into account. This refers to the money paid at closing to the lender. It may include one or more of the following fees: a loan origination fee, points, appraisal fee, title search and insurance, survey, taxes, credit report charge and other costs assessed at conclusion.

One of the variations which have broad appeal is the 125 home equity loan so selected because the borrowers can get up to 125 % of the current combined loan to value (CLTV). This type of loan is mainly appealing to first time home buyers who may need to spend extra money on furniture, home improvements, landscaping, etc.

The extra money can be used for debt consolidation, medical expenses, or college tuition as well .There is such a wide variety of loans you can get using the equity in your home as collateral that it can be confusing. But if you do a little research you can find one that is just right for you and your needs.

house closing costs

Paying the house closing costs is becoming more prevalent across the whole country, according to realty experts in Maryland. This may seem strange as the house price could just be dropped and it would appear that the sell/buy formula would still have the same balance.

However, this isn’t quite the case; where the balance is changed is by using a lender. Almost all house purchases are not paid by cash they are paid by the cash borrowed from the mortgage lender. This means that if the house price is $200.000 and the buyer has to put 5% out as a down payment, the buyer will need to find $10,000 deposit.

The 95% loan on the $200,000 house will be $190,000. Knowing these figures, a couple or family will set about looking for their dream home at that price. Once they have found it and it is surveyed, there may be one or two things wrong with it. Perhaps the lender now says that as the property needs a new roof, they will withhold the $5,000 to replace the roof.

This will put the buyer in a predicament as most people pull out all the stops to get the house they want and there is no cash left over.

The seller looks like they are going to lose the sale for a mere $5,000.00. If the house price is dropped the buyer will simply get less from the lender, because they will get 95% of the revised (dropped) price, plus they will take off the same $5,000 for the roof. This would mean that the deal is no further ahead.

Another disadvantage with dropping the price is that all the paperwork has to be done again and this delays the transaction. Delay is never a good thing in a house sale, it can make either party nervous or the deal can just lose its momentum.

Here is where the seller can step up and say one of two things that will help. The seller could suggest he will pay for or get the roof done. The seller could also suggest that he will pay the house closing costs so that the buyer can afford to add his extra money (saved for the house closing costs) onto the lenders cache.

Either way, the seller has ‘helped’ the buyer to buy the house. This is a choice that is strictly the seller’s call. It is obviously a financial loss to the seller, and a financial gain to the buyer.

Why would a seller ‘give’ some money to a prospective buyer to help with house closing costs? Well, if this kind of deal were to happen at all, it would only happen on the advice of the listing real estate agent. The agent will know if such an offer would ‘clinch’ the deal, and in fact would likely make sure that such a deal would only be offered if it did finalize the deal into a legally binding sale.

For the buyer, this means that in a buyer’s market, in which it is obviously not so easy to sell a house, he has managed to retain the prospective buyer and keep the buyer’s interest and money involved in the sale of his own property, thus encouraging the sale.

In the overall picture, $5,000 can probably be recouped by the seller more easily than trying to find a new buyer and waiting another two months. During the theoretical two month wait, house prices could drop further – a further $5,000.00 even! This is called cutting your losses.

It is not be an option that a seller will want to include when he lists his house, but it makes good business sense to proceed in your house selling with an open attitude that will allow for such a magnanimous gesture if needs be.

house closing costs

When closing on a mortgage, there are always plenty of house closing costs and fees that apply. Many people just assume that these costs go straight to the loan officer but it’s not like that at all. There are many different fees that are all put together and called house closing costs. There are several different fees that go to several different locations for their assistance in the processing and paperwork of the mortgage. There are many different fees and it can even depend on your state requirements.

-Points These are usually required to be paid up front when the mortgage is closed.

-Escrow deposits for taxes these are your state taxes. They vary from state to state.

-Private mortgage insurance A lot of lenders ask that you have insurance in case you default on your loan. This insurance is usually one-half of one percent of the cost of the mortgage.

-Appraisal fees These fees go towards the appraiser who appraised the property. The home needs be appraised so that the bank can know whether or not the home is good collateral.

-Property survey Loan officers want to have a survey done of the property so that the exact boundaries are known to both parties.

-Loan origination fees These fees apply to the loan officer but his work in organizing and processing the mortgage.

-Title insurance The amount is based on the amount of the loan. This is insurance to protect

the title just in case someone else claims to own the property.

-Inspections Loan officers want the home to be inspected and also a pest inspection. These are standard for all who purchase homes.

-Homeowners insurance This is paid for by the home owner to protect their purchase.

-Credit reports There are many different reports that are made, but these are some of the most important and essential.

These are just a few of the fees that may or not be applied in your house closing costs. Pay attention to all the fees to make sure that the ones included in your house closing costs are legit. The fees are split up in many ways and can range from $15 to $500 each. Its a good idea to review all fees with your lender. If you have any questions, dont hesitate in asking them.

Try not to be frustrated or worried about paying so many fees. Keep in mind that there are many different factors when it comes to purchasing real estate and many different people are doing their part to help you be able to purchase it. Buying real estate is a large investment and the loan officers trying to help you in all ways. The average house closing costs can be anywhere from $2500 to $5000 but it depends on a lot of things.

As always, make sure you have good communication with your lender. If you have doubts about anything, just talk to them about. If you feel like you will not be able to pay the house closing costs soon, then maybe you should wait a while before applying for a mortgage.

house closing costs

Buying a home is an exciting process. You determined how much home you can afford, you saved your down payment, you and your REALTOR® found the perfect home and your offer was accepted. While the purchase price of your home is the largest cost you will encounter, there are other costs to prepare for when buying a home.

It’s a good idea to budget some extra cash to cover the cost of obtaining a mortgage and “closing” your real estate transaction. Here are some of the extra cost items you should consider:

Appraisal fee: Mortgage lenders will usually loan a percentage of the home’s purchase price or the market appraisal of the property, whichever is lower. The appraisal is either done by someone on the lender’s staff or by an outside professional approved by the lender. The cost of the appraisal is most often the responsibility of the home buyer.

Application fee: Find out whether or not your lending institution charges to process your mortgage application. In many cases, if you are dealing with a bank that you have other accounts with, they will waive the application fee.

Land survey fee: Lenders require a plot plan or survey of the property you intend to buy. On properties located in subdivisions in urban areas, lenders will often accept an existing survey, depending on when it was done. However, if there is no existing survey, be prepared to pay a substantial fee for a new survey.

Home inspection fee: Many homebuyers choose to have a home inspection done prior to finalizing their offer to purchase. Some lenders require a professional home inspection as well.

Legal fees: You will need to pay your house closing lawyer to arrange your mortgage as well as for “disbursements” such as title search, drawing up the title deed and preparing and registering the mortgage.

Land transfer taxThis tax is payable by anyone who purchases property in Ontario. A REALTOR® or house closing lawyer can help you calculate how much tax you will pay on your purchase.

GSTIf you are buying a new home, you will be required to pay Goods and Services Tax of seven percent on the price of your home. GST does not apply to most resale homes.

InsuranceThere are several types of insurance that may be required when buying your home. If you are arranging a “high-ratio” mortgage (less than 25% down payment) you will need to purchase mortgage insurance. Mortgage lenders require you to carry fire and extended coverage insurance that exceeds the amount of the outstanding balance of the buildings. Other insurance you may want to consider include title insurance and life insurance.

Other costsYou will likely have to make property tax adjustments and interest adjustments on utility bills, heating oil etc. Ask your REALTOR® to explain these additional costs so you have no surprises on closing day.

Maintenance and utility costs: Finally, be sure to budget for heating, electricity, water and any immediate renovations you may have planned. It’s a good idea to put aside any spare cash and contribute regularly to a maintenance fund so you will be prepared for any repairs or upgrades you need to make along the way. Source OREA

house closing costs

January 20, 2010 — today the FHA announced policy changes on FHA Mortgages.  The FHA will propose to take the following steps: increase the mortgage insurance premium (MIP); update the combination of FICO scores and down payments for new borrowers; reduce seller concessions to three percent, from six percent; and implement a series of significant measures aimed at increasing lender enforcement.

FHA Mortgage Policy Changes:

1. An increase in the Mortgage Insurance Premium (MIP) from 1.75% to 2.25%.  On a $200,000 loan, that would cost you an extra $1,000 in house closing costs.  This policy change goes into effect in the spring.
2. New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. New borrowers with less than a 580 FICO score will see an increase in their house closing costs as they will be required to put down at least 10%.  This policy change goes into effect in the early summer.
3. Seller concessions reduced from 6% to 3%.  A seller concession is when the seller pays all, or a portion of, your house closing costs.  A 3% reduction doubles the amount of house closing costs that have to come out of the buyer’s pocket; which is especially hard for first time home buyers.  This policy change goes into effect in the early summer.
4. Increase enforcement on FHA lenders

House closing costs can be considered everything outside of the purchase price that a buyer has to pay for a complete real estate transaction.  For a seller, house closing costs are in the form of the fees, except liens or encumbrances.  These can be deducted from the purchase price. When buying or selling a home you should be aware that there are house closing costs involved. These are fees and/or expenses that you pay at the time of closing. Although it would be nice to not have to pay these fees, this is not possible in most cases. Closing costs are the innumerable fees and taxes associated with purchasing and taking ownership of a home. They include searches, clearances, and reports to process the transaction. Depending on where you live and the complexity of your transaction, they can easily add up to thousands of dollars.

You can make the seller to pay your house closing costs, but this is part of the negotiations that you will have to deal with on your own. Generally , house closing costs to buy a home will be approximately 2 to 3 percent of the purchase price. This can and will change depending on the property you are buying as well as the situation that you are in. Additionally, a large portion of your house closing costs have a lot to do with the points and other fees that are charged by your lender. naturally, you will want to find a reputable lender that is not going to overcharge you in this area. There are several non-recurring fees that are involved in the house closing costs. These include items such as: escrow, title policies, taxes, endorsements, lawyer fees, home inspection, wire fees, and notary fees.

Common recurring fees that go into house closing costs include: property taxes, flood insurance, prepaid interest, private mortgage insurance, and fire insurance. You should keep in mind that both non-recurring and recurring fees will vary based on your situation. Not only will the type of fees vary, but the price that you have to pay will also change based on the property that you are buying. There is no reason to get upset with the house closing costs that you are going to have to pay. The fact of the matter is that this is a part of buying or selling a home. Even though it can become quite expensive, there is no way around these fees. Not only do house closing costs go towards making things easier on you, but they also go towards paying people such as lawyers, a notary, etc.

All in all, look at house closing costs as a necessary evil. Do you really like to pay these fees? Absolutely not. But if you deceide to buy or sell a home don’t have any choice rather than it has to paid. So don’t get upset with the house closing costs that you have to owe.Just put the money separately to incur these expenses. This will make the process much easier on you since you will have all the money you need at hand.

house closing costs