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

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

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

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

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

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