Closing Costs

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The cost of buying a home is more than just the purchase price. Each and every Homebuying transaction requires the service the services of a large number of professionals from a variety of fields. it’s common for these costs to add up to 2% to 3% of your total mortgage. When you chose to work with a lender, your home mortgage consultant will give you a Good Faith Estimate of your estimated closing costs shortly after you apply.

While it is only an estimate, it can help you budget for your closing.. We can also work with you to include your closing costs in your loan amount to reduce the amount of out-of-pocket money involved.

The amount you pay in closing costs varies among lenders, mortgage products and localities. The closing costs fees generally fall into one of three categories: out-of-pocket expenses, pre-paid items and points.

Out-of-pocket expenses

These usually cover third party services that are directly charged to you, such as fees for appraisals, attorneys, credit reports, title (deed recording), or tax services. Which services you must pay for varies on the property location and home financing program. If you don’t understand what a particular fee covers, or why you are required to pay it, ask me to explain.

Prepaid Items

These can vary based on the type of property and the time of the closing, but they generally include homeowner’s insurance, mortgage insurance, and fees associated with establishing an escrow account. Escrow accounts are set up by lenders to pay property tax and insurance premiums. Instead of paying the entire premium every six or twelve months, the borrower pays a portion of the cost along with every monthly mortgage payment. This helps the borrower avoid the hassle of planning for the large payments, while reassuring the lender that tax and insurance payments are always up to date. using an escrow account can be an option, but is a requirement with less than a 20% down payment.

Points

Fees, with each point representing 1% of your loan amount, that cover the cost of your mortgage loan. Generally, points can be split into two categories:

Origination Points: This is an amount collected by the lender for making the loan

Discount points: This is a fee that allows you to buy down your interest rate. In other words, in return for paying more discount points up front, you can lower your interest rate and thus your monthly payment.

To make the best apples-to-apples comparison on lenders and home financing packages, be sure that the rates all have the same number of total points and that you factor in the total amount you will be paying in closing costs. While one loan may offer a lower rate, it may also require you to pay a higher number of points at closing and more money out of pocket for you. Also, don’t forget to consider loan features and service after closing in addition to the rate, APR, and points when you compare different loan programs.

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