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Posts tagged ‘Closing Costs’

Keep Your Closing Costs Low

Closing costs can surprise many homeowners if they aren’t prepared for them and can seriously deplete savings at a time when most people need money the most.  It seems that lenders are constantly finding new and creative ways to tack on a few dollars here, and a few dollars there to the tune of thousands.  However, by taking a few simple steps you can keep your closing costs low and know when to tell your lender that enough is enough!

First, you should always be a savvy consumer when it comes to title work.  You have the right to select any title company you want and not the one that the mortgage company wants to force upon you.  Of course, the mortgage company they want you to use always turns out to be one of the more expensive ones (because they are getting kickback fees).  Shop around for a title work company and you can often save 30% right off the bat, and if you are willing to really work at it, save upwards of 50%.  It’s not chump change either – a title company can easily charge $1,200 for basic title services.

Next, be on the lookout for junk fees.  Lenders love to pile on the document preparation fees, interest locking fees and anything else they can think of.  Often times they throw these fees onto mortgages that have no points attached to them.  Make sure that you ask your lender for a full disclosure of all the fees and then ask them about any that seem out of line.  If you aren’t happy with what they quote you, tell them you are looking around at other lenders.  The last thing a lender wants to do is lose 30 years worth of interest because of a $200 junk fee!

If you aren’t going to be in the house for more than a few years, ask the seller to pay the closing costs.  Sure, you’ll end up paying a higher interest rate, but if you plan on moving in a few years then the cost of the interest won’t match the closing costs you would have to pay up front.  Plus, you pay the extra interest off is small chunks each month rather than being out a lot of money up front. 

Watch out for lenders who try to sell you add-on products with your mortgage.  They love to try to get you to buy credit insurance (a total waste of money) and some lenders even try to sell you services such as “plumbing protection” or “whole house appliance protection”.  Just say no!

Remember, you have the power to say no thanks at any time before you sign on the dotted line.  If you don’t like the figures your lender is talking about for closing costs, shop around – in fact, you should around and get several mortgage offers before you even consider one.  Don’t be afraid to get up and walk away from the table.  After all, it’s your money – don’t let a greedy lender try to squeeze another $1000 out of you when you have enough stress taking place buying a home in the first place!

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Who Is Responsible For Closing Costs

Buying or selling a home is a euphoric experience for both of the parties involved. This euphoria can cool when you learn which party is responsible for the closing costs.

Who Is Responsible For Closing Costs

When looking to buy or sell a home, every person eventually arrives at the question of funding closing costs on the transaction. To put it simply, both buyers and sellers typically are responsible for some of the closing costs. However, the exact amounts paid can vary significantly from area to area and depending on what agreements the buyers and sellers come to in the offer-counteroffer process.

It is important to research the area you are looking to buy or sell in and be knowledgeable regarding any laws and standards of practice for the area. Yes, the requirements are different in each state and often each city. Know what you will have to pay ahead of time so you can be prepared to cover these costs. Here are some examples of what buyers and sellers generally have to cover.

Buyers typically pay the following: fees charged for obtaining a mortgage; inspection fees; homeowner’s insurance (must be prepaid for one year at closing); transfer taxes if there are any (although the seller may pay these or they may be shared 50-50 between buyer and seller); title insurance and escrow fees (varies depending on the location); and attorney’s fees (if and where attorneys are involved in the transaction). If you are confused, a mortgage broker can tell you which fees are customarily paid for by the buyer in your area and how much they will cost. When buying a home, the use of mortgage brokers is highly recommended to both get a great deal on a mortgage and help with the transaction itself. The broker only gets paid if the deal goes through, so you know they will make every effort.

Sellers’ closing expense responsibilities typically include: loan payoff fees; the real estate commission (in some cases, a portion of this may be paid by the buyer); title insurance (depending on the location); termite repairs (this is negotiable in some areas); cash payments in lieu of repairs to the property; all or part of transfer taxes and escrow fees, if there are any; attorney’s fees where applicable; and other fees set by local custom or negotiated during the transaction.

Knowing and researching the area you are buying or selling in is critical to understanding who is responsible for closing costs. Educate yourself and you will avoid overpaying.

Does It Pay to Re-Finance?

This is a question many homeowners may have when they are considering re-financing their home. Unfortunately the answer to this question is a rather complex one and the answer is not always the same. There are some standard situations where a homeowner might investigate the possibility of re-financing. These situations include when interest rates drop, when the homeowner’s credit score improves and when the homeowner has a significant change in their financial situation. While a re-finance may not necessarily be warranted in all of these situations, it is certainly worth at least investigating.

Drops in the Interest Rate

Drops in interest rates often send homeowners scrambling to re-finance. However the homeowner should carefully consider the rate drop before making the decision to re-finance. It is important to note that a homeowner pays closing costs each time they re-finance. The closing costs may include application fees, origination fees, appraisal fees and a variety of other costs and may add up quite quickly. Due to this fee, each homeowner should carefully evaluate their financial situation to determine whether or not the re-financing will be worthwhile. In general the closing fees should not exceed the overall savings and the amount of time the homeowner is required to retain the property to recoup these costs should not be longer than the homeowner plans to retain the property.

Credit Score Improvements

When the homeowner’s credit scores improve, considering re-financing is warranted. Lenders are in the business of making money and are more likely to offer favorable rates to those with good credit than they are to offer these rates to those with poor credit. As a result those with poor credit are likely to be offered terms such as high interest rates or adjustable rate mortgages. Homeowners who are dealing with these circumstances may investigate re-financing as their credit improves. The good thing about credit scores is mistakes and blemishes are eventually erased from the record. As a result, homeowners who make an honest effort to repair their credit by making payments in a timely fashion may find themselves in a position of improved credit in the future.

When credit scores are higher, lenders are willing to offer lower interest rates. For this reason homeowners should consider the option or re-financing when their credit score begins to show marked improvement. During this process the homeowner can determine whether or not re-financing under these conditions is worthwhile.

Changed Financial Situations

Homeowners should also consider re-financing when there is a considerable change in their financial situation. This may include a large raise as well as the loss of a job or a change in careers resulting in a considerable loss of pay. In either case, re-financing may be a viable solution. Homeowners who are making considerably more money might consider re-financing to pay off their debts earlier. Conversely, those who find themselves unable to fulfill their monthly financial obligations might turn to re-financing as a way of extending the debt which will lower the monthly payments. This may result in the homeowner paying more money in the long run because they are stretching their debt over a longer pay period but it might be necessary in times of need. In these cases a lower monthly payment may be worth paying more in the long run.

Mortgage Costs to Watch Out For

Faced with plunging property values and rising defaults, lenders are charging borrowers higher mortgage rates and adding fees. Not all of these added costs are set in stone, however. If you’re looking for a loan, vigilant shopping and a little haggling can go a long way toward landing a better deal.

Here are some fees you need to watch out for:

Application Fees

Just because an ad says “no application fee” doesn’t really mean there’s no fee to get the loan. Fees paid outside of closing typically include an application fee, an upfront property appraisal fee, and a credit check. They might be disguised as something like a “document processing fee” or “doc fee.”

Risk Adjust Rates

Getting deemed a risky borrower is no longer just a matter of a low credit score. Lenders now consider other risk factors. Buy in an area that has seen values drop precipitously and you can expect a higher interest rate.

Down Payment Penalties

The days of zero down on a mortgage are over. Without a down payment of at least 20%, prospective homebuyers will undoubtedly get hit with a higher interest rate and need to pay for more points. (Each point usually amounts to a fee of about 1% of a mortgage.)

Also, if buyers can’t put 20% down, they’ll need to get private mortgage insurance, which typically costs 0.5% of the loan. Shopping around for lenders with more-favorable points and insurance charges can help lessen the blow.

Closing Costs

Closing fees amount to 2% to 5% of a home’s price. Location plays a big role, as taxes and other requirements vary by state. Some states require expensive attorneys to oversee the closing process, while others allow a title agent or escrow officer.

Ask potential lenders for a good-faith estimate of closing costs. Then check in weekly with whoever is handling the closing to see whether there are any changes in either lender or third-party fees.