Many of your mortgage closing costs go to a third-party for services necessary to complete the transaction. Lenders typically have no control over these fees.
• Appraisal ($225 – $450) *
The appraisal is required to determine the fair market value of the home. A property appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property. Therefore, an appraiser is needed to make this determination and buyers need this money outside of the closing cost.
• Home Inspections Fees ($275 to $400) *
A professional home inspection will give you an unbiased, informed report on the condition of the home and its systems. It will help you reduce your risk and make an informed purchase decision. They will inspect the structure and all the major systems of the house and provide you a comprehensive, easy to understand report. Typically a 25-30 page narrative report includes digital pictures and addresses the Roofing, Exterior, Interior, Structural components, Plumbing and Electrical systems Heating/Air conditioning system, Insulation and ventilation and Built-in kitchen appliances.
• Credit Report ($15 – $30)
When you apply for a mortgage, you have to prove that you are capable of paying it back. Lenders will obtain a copy of your credit report to review your borrowing history and ultimately determine if they should risk lending you money. This fee goes to the credit reporting agency like Experian, TransUnion or Equifax.
• Title Closing Fee ($150 – $250)
This fee is paid to the title company or attorney for conducting the closing.
• Title Company Title Search or Exam Fee ($100 – $250)
This fee is paid to the title company for doing a detailed search of the property records for your home. The title company will look at prior deeds, court records, property and name indexes, and many other documents. This is to ensure that there are no liens or problems associated with your ownership of the property.
• Survey Fee ($125 – $150)
A survey of the property may be required to verify boundary lines for your property and to ensure that there is no encroachment on the lot.
• Flood Determination/Life of Loan Coverage ($15 – $25)
This cost goes to determining whether or not your property is located in a federally designated flood zone. If the property is found to be located within a flood zone, you will need to buy flood insurance.
• Title Company’s Courier Fee ($30 to $75)
This covers the cost of transporting documents to complete the loan transaction as quickly as possible to avoid paying additional interest on your mortgage loan.
• Title Insurance (Lender’s Policy) (Varies – generally between $200 – $875)
This covers the costs of assuring the lender that you own the home and the lender’s mortgage is a valid lien.
• Title Insurance (Owner’s Policy) (Varies – generally between $400 – $1000)
This is an insurance policy protecting you in the event someone challenges your ownership of the home.
• Homeowners Insurance (Varies – $500 and up)
Homeowners Insurance is required to cover possible damages to your home. In the event of a fire or other damage, homeowners will receive this insurance to cover the costs of rebuilding. Your first year’s insurance is often paid at closing with these funds.
• Title Company’s Lender required Endorsements ($250 – $400 and up)
This fee is paid to the title company for additional Lender required insurances on your behalf.
• Escrow Set Up ($1000 to $3500)
Preparing the account for the Lender so the future taxes and home insurance will be paid and monies accounted for the future payments when due. THIS IS NOT A FEE…but represents monies held on the Buyers behalf.
• Transfer Tax (.003 of the purchase price, $300-$1250)
The latest news and musings about the Mortgage, Real Estate Financing industry
Thursday, March 10, 2011
Tuesday, March 8, 2011
Closing Costs and Fees Explained Part 3: Lender Fees
Mortgage Closing Cost Lender Fees
• Lenders Charges ($0 to 850)
• Mortgage Broker Fees (1-3%)
The Mortgage Network of Ohio Inc typically charges 1 to 3% of the loan amount, for its services. These services include but are not limited to prequalifying the buyer and collecting the papers and signatures needed to start the process. This way all parties know what to expect financially with the purchase price and payments including the taxes and insurances. This includes the credit check and the verification process on the Buyers income and Funds to close (typically funds to close must be in your account for at least 60 days). Once a contract is negotiated, we will lock in your loan for a time that is reflected on the purchase contract at terms and conditions most favorable to the buyer and at that time have the RESPA’s and State forms signed. The Lender orders the appraisal and we order the title work and oversee that order and work with all parties to insure a smooth closing. Near closing, we review the Settlement Statement with the Buyers and answer any/all questions in preparation of the closing. The Mortgage Network gives back to the buyer any amount that is a credit from the selected rate called Lender Paid Compensation to the buyer to offset the closing cost. If your Buyer goes it alone they may not receive the credit to offset the closing cost and they are subject to that one Banks or Credit Unions rates, fees and programs, so essentially the competitive advantage is lost. Another credit that a buyer will receive is the credit that is typically given from the seller to the buyer for the property taxes being one year in arrears. This too will help to offset the closing cost numbers and need to be figured into the net figures of doing a purchase loan. If you would like to see how this would work in your individual situation, give me a call or email me and of course there’s no cost and certainly no obligation.
• Lenders Charges ($0 to 850)
• Mortgage Broker Fees (1-3%)
The Mortgage Network of Ohio Inc typically charges 1 to 3% of the loan amount, for its services. These services include but are not limited to prequalifying the buyer and collecting the papers and signatures needed to start the process. This way all parties know what to expect financially with the purchase price and payments including the taxes and insurances. This includes the credit check and the verification process on the Buyers income and Funds to close (typically funds to close must be in your account for at least 60 days). Once a contract is negotiated, we will lock in your loan for a time that is reflected on the purchase contract at terms and conditions most favorable to the buyer and at that time have the RESPA’s and State forms signed. The Lender orders the appraisal and we order the title work and oversee that order and work with all parties to insure a smooth closing. Near closing, we review the Settlement Statement with the Buyers and answer any/all questions in preparation of the closing. The Mortgage Network gives back to the buyer any amount that is a credit from the selected rate called Lender Paid Compensation to the buyer to offset the closing cost. If your Buyer goes it alone they may not receive the credit to offset the closing cost and they are subject to that one Banks or Credit Unions rates, fees and programs, so essentially the competitive advantage is lost. Another credit that a buyer will receive is the credit that is typically given from the seller to the buyer for the property taxes being one year in arrears. This too will help to offset the closing cost numbers and need to be figured into the net figures of doing a purchase loan. If you would like to see how this would work in your individual situation, give me a call or email me and of course there’s no cost and certainly no obligation.
Wednesday, March 2, 2011
Closing Costs and Fees Explained
Mortgage closing costs are what you pay to close your loan application. This subject can get rather in depth, so what I'll do is, over the next few days, post updates explaining the different fees and costs to help you understand exactly what you end up paying and what you get for that. Be sure to keep checking back here for updates this week. Also, you can follow my Facebook and Twitter updates to make sure you don't miss a thing.
So, where do these closing costs go? Some costs and fees go to third parties, some are state and local government fees that must be covered and some go to your lender. Top of Form
Closing cost cover the services that must be performed to process and close your loan. At the time you apply for a loan, lenders are required by law to disclose to you, in writing, what the estimated mortgage closing costs will be. This is known as the Good Faith Estimate, once disclosed these cost cannot be increased by the Lender to the Buyer for that home.
Closing costs can vary by mortgage option and amount, so the costs on a 30-year fixed or a 15-year fixed may not be exactly the same as a FHA or VA Loan which allow up to 6% max seller paid concessions while Conforming loans allow a maximum of 3 % concessions of what a seller can cover as what is labeled closing cost.
Outside of the down payment which we are not including as closing cost, the down payment is just that, the down payment. These can be zero down for VA loan and as low as 3.5% for FHA loans and 5% or more for conventional loans. There are other costs and fees associated with your home purchase outside of the closing cost which are the inspections and appraisals cost that your borrower needs to have those monies readily available.*
Average closing costs that can be written into your purchase agreement is generally range from $2,500 to $5,000 of your loan – this is a sizable amount of money when you consider this is paid upfront at closing. But where exactly does it all go and where is it coming from?
A common misconception about mortgage closing costs is that they all go to the lender, when in reality; many of the costs are related to services performed by others, which the Mortgage Broker is overseeing on the buyer’s behalf. Mortgage closing costs cover expenses associated with getting a home loan include the cost of a title company and its title insurance cost, the first years home owner policy and property taxes and if the buyer is setting up escrows for the loan or not. It is important to check your lender fees and closing costs carefully. If a lender boasts incredibly low rates, it’s possible they will try to make up the difference with exorbitant lender fees. If the fees are unusually low, then the rate maybe higher to compensate. We offer a no closing cost option, but that is your choice once we determine your needs and financial considerations.
So, where do these closing costs go? Some costs and fees go to third parties, some are state and local government fees that must be covered and some go to your lender. Top of Form
Closing cost cover the services that must be performed to process and close your loan. At the time you apply for a loan, lenders are required by law to disclose to you, in writing, what the estimated mortgage closing costs will be. This is known as the Good Faith Estimate, once disclosed these cost cannot be increased by the Lender to the Buyer for that home.
Closing costs can vary by mortgage option and amount, so the costs on a 30-year fixed or a 15-year fixed may not be exactly the same as a FHA or VA Loan which allow up to 6% max seller paid concessions while Conforming loans allow a maximum of 3 % concessions of what a seller can cover as what is labeled closing cost.
Outside of the down payment which we are not including as closing cost, the down payment is just that, the down payment. These can be zero down for VA loan and as low as 3.5% for FHA loans and 5% or more for conventional loans. There are other costs and fees associated with your home purchase outside of the closing cost which are the inspections and appraisals cost that your borrower needs to have those monies readily available.*
Average closing costs that can be written into your purchase agreement is generally range from $2,500 to $5,000 of your loan – this is a sizable amount of money when you consider this is paid upfront at closing. But where exactly does it all go and where is it coming from?
A common misconception about mortgage closing costs is that they all go to the lender, when in reality; many of the costs are related to services performed by others, which the Mortgage Broker is overseeing on the buyer’s behalf. Mortgage closing costs cover expenses associated with getting a home loan include the cost of a title company and its title insurance cost, the first years home owner policy and property taxes and if the buyer is setting up escrows for the loan or not. It is important to check your lender fees and closing costs carefully. If a lender boasts incredibly low rates, it’s possible they will try to make up the difference with exorbitant lender fees. If the fees are unusually low, then the rate maybe higher to compensate. We offer a no closing cost option, but that is your choice once we determine your needs and financial considerations.
Wednesday, February 23, 2011
The True Cost of Credit Scores When Mortgaging a Home
"When it comes to mortgages, auto lending and credit cards, the higher your score, the lower the interest rate you're going to pay," says Barry Paperno, manager of customer service for credit scoring company Fair Isaac, which created the widely used FICO credit score. So the time and effort it takes to improve your credit score could save you hundreds of thousands of dollars over the course of your lifetime. For most people, a mortgage loan is where they'll reap the greatest rewards from an improved credit score, otherwise the ramifications are costly.
With mortgage rates bottoming out a few months ago, Sept-Oct 2010, it is important that your scores are at the highest possible levels that you can achieve. That applies to people who have excellent credit scores and those in the low 600's. Both can be qualified for a mortgage loan, but they will be at different rates. However, for people who have less-than-excellent credit, there are multiple ranges of scores and pricing that matches each range. I would say the difference between a low score of 600 and a high score of 740+, there will be a difference of 1% in the rate, which equates to almost $45,000 of higher interest paid over the life of the loan.
Breaking Down the numbers:
Median of 723 means that half of the people fall below that score and half of the people have scores higher. Here's a breakdown of how scores are distributed across the population, according to MyFICO:
300-599 = 15 percent of the population (Unable to qualify for a mortgage loan)
600-649 = 12 percent (2 pricing levels in this category, 600-619 and 620-649)
650-699 = 15 percent
700-749 = 18 percent (740 and above is the new Creme of the scores, 723 is median)
750-799 = 27 percent
Over 800 = 13 percent
With The Mortgage Network of Ohio Inc, a consumer with a FICO score over 740 wold qualify for an FHA loan today and get a 4.75% rate on a $200,000 30-year fixed rate mortgage. That same consumer with a FICO score between 640-739 would get a rate that would be an eighth of a percentage point higher (4.875) on the same loan. Many lenders are saying "No" to clients with scores under 639. We have a program to assist those clients at elevated rates and for those borrowers with scores of 600-619, that rate would be closer to a full percentage point higher than the best scoring customer (about 5.75%) and if you are between 620-639, then that would be closer to 5.25%. Worse yet, a consumer with a score under 600 seems to be shut out of the market.
With mortgage rates bottoming out a few months ago, Sept-Oct 2010, it is important that your scores are at the highest possible levels that you can achieve. That applies to people who have excellent credit scores and those in the low 600's. Both can be qualified for a mortgage loan, but they will be at different rates. However, for people who have less-than-excellent credit, there are multiple ranges of scores and pricing that matches each range. I would say the difference between a low score of 600 and a high score of 740+, there will be a difference of 1% in the rate, which equates to almost $45,000 of higher interest paid over the life of the loan.
Breaking Down the numbers:
Median of 723 means that half of the people fall below that score and half of the people have scores higher. Here's a breakdown of how scores are distributed across the population, according to MyFICO:
300-599 = 15 percent of the population (Unable to qualify for a mortgage loan)
600-649 = 12 percent (2 pricing levels in this category, 600-619 and 620-649)
650-699 = 15 percent
700-749 = 18 percent (740 and above is the new Creme of the scores, 723 is median)
750-799 = 27 percent
Over 800 = 13 percent
With The Mortgage Network of Ohio Inc, a consumer with a FICO score over 740 wold qualify for an FHA loan today and get a 4.75% rate on a $200,000 30-year fixed rate mortgage. That same consumer with a FICO score between 640-739 would get a rate that would be an eighth of a percentage point higher (4.875) on the same loan. Many lenders are saying "No" to clients with scores under 639. We have a program to assist those clients at elevated rates and for those borrowers with scores of 600-619, that rate would be closer to a full percentage point higher than the best scoring customer (about 5.75%) and if you are between 620-639, then that would be closer to 5.25%. Worse yet, a consumer with a score under 600 seems to be shut out of the market.
Thursday, January 27, 2011
Straight Talk: Have Rates Bottomed Out:
Mortgage rates volatility... Can you hedge your decision to lock your interest rate?
When we purchased our first home in 1982, my wife and I locked in a 12% rate on a Land Contact and we were thrilled. Back when the 30 Year fixed rates were 16+%. When we purchased our second home in 1989 we secured a mortgage on 30 year fixed rate at 8.75% and again I thought I was brilliant since rates had been hovering for years over 10%. Today, those rates sound absolutely crazy! Today’s rates on a 30 year fixed rate conforming loan (under $417,000) as I write this (1/17/11), the 30 year fixed rates are hovering in the high 4’s and 15 year terms in the low 4’s. This past November those rates were in the high 3’s and mid 3’s for the same. We had never seen rates like those going all the way back to 1950’s (the oldest chart I located). What should you do today? Call me today for a free, no obligation, current rate quote with a low or no closing cost option and see how we can improve your situation.
So are some homeowners still waiting for lower rates to refinance or purchase?
Some clients are optimist thinking rates are going lower...until they don’t; the bond market (which determines mortgage rates) can be fickle. The one thing it has taught us is that rates can go up much faster than they come down. Since everybody has a different tolerance to risk it is best to know what you are risking by waiting for rates to drop further. While some potential clients may get hung up on the rate itself, when in fact getting started with a shorter term can be the real savings for you today! This volatility makes timing the bottom very difficult, to near impossible. In your decision to move forward in a refinance, find a lender who can show you the savings that you can lock in today, with perhaps both a lower rate and shortened term. For example if you have paid on your 30 year mortgage for a few years and the rate is in the mid 5’s plus, we have placed many clients on a 15 or 20 year term reduced the Rate and reducing the Term so in essence reducing the total of payments. It is not as much your interest rate as it is the term of your mortgage that will affect your true net worth the most! If you would like to see how this would work in your situation, give me a call or email me and of course there’s no cost and certainly no obligation.
Subscribe to:
Posts (Atom)