Closing Costs!!!! The word, COST, alone is bad enough. Just hearing that word sends hate, fear, anxiety through our system. No one likes costs, is uses up our money. But they’re necessary sometimes and you just can’t get around it. What’s even worse than just cost…closing costs. Those words together can REALLY upset someone who is trying to buy a house. It’s hard enough just to come up with the down payment, but now you have to come up with more money to get in that house. Closing costs exist because everyone wants their share of the pie. The loan originator, the bank, the title company, etc. But most people don’t know what these costs are, or they don’t know if the fee should be there or not. Usually closing costs are usually between 2% to 4% of the purchase price. The list below is the usual costs associated with buying a home or refinancing your home (Some states differ on what can and cannot be charged. Always compare your lender).
• Title Policies
• Escrow or Reserves
• Notary
• Wire fees
• Courier / Delivery
• Attorney fees
• Endorsements
• Recording Fees
• State, County or City Transfer Taxes
• Home Protection Plans
• Natural Hazard Disclosures
• Home Inspection
• Loan origination points
• Lender/Bank Fees
Now not all of these fees are paid by the buyer, sometimes the seller will pay some of these costs (It all depends on the deal that is worked out). When it comes to refinancing, usually all of these costs can be rolled into the new loan. But don’t sweat it; it will be worth it once you get into your new home!
Friday, November 20, 2009
Wednesday, November 18, 2009
Mortgage Terminology
Welcome to the start of my home mortgage education, learning, and curiosity blog. As you are going through the home buying process, one comes across many words that no one understands except the loan officer and the real estate agent. So to start off my blog, I would like to educate some of you curious readers with the common terms associated with getting a home loan.
Closing Costs
-Expenses incurred by the buyer and seller in a real estate or mortgage transaction. (I will get more in depth on this in the next posting)
PITI
-Principal, Interest, Taxes, Insurance
Earnest Money
-A deposit made by a buyer of real estate towards the down payment to evidence good faith. This money is typically held by the real estate brokers or the escrow/title company.
Equity
-The market value of the property, minus the amount of any liens/loans. Equity is often expressed as a percentage of the property value.
Escrow Account
-An account setup through the lender (bank) to hold over monies received from the borrower (buyer) to pay for certain debts. Usually setup for insurance and taxes.
Good Faith Estimate (GFE)
-The form that lists all the charges the borrower must pay at closing. The lender or loan officer is obligated to provide the borrower this form within three business days of receiving the loan application.
LTV
-Loan To Value. The percentage of the amount of the loan to the value of the home or the appraised value of the home. This helps determine the equity in your home.
Mortgage Insurance
-Insurance that covers the lender (bank) incase the borrower (buyer) defaults on the loan. Given out to borrowers that have less than 20% equity in the their home.
Points
-Fees paid by the seller and/or buyer. They can either be origination and discount . 1 point = 1 percent of the loan amount. Example, on a $100,000 loan, 1 point is $1000. Origination is what the loan officer charges the buyer, which can range from 0 points to 1 point. Discount points is what the lender charges the buyer, which ranges from 1 to 3 points.
80-10-10
-Rule for financing a home, 80 is the percentage amount of the home value the lender (bank) will loan up, 10 is the percentage amount the 2nd lender will loan up and 10 is the last amount provided by the borrower (buyer).
80-15-5
-Rule for financing a home, 80 is the percentage amount of the home value the lender will loan up, 15 is the percentage amount the 2nd lender will loan up and 5 is the last amount provided by the borrower (buyer).
Underwriting
-The decision whether to make a loan to a potential home buyer based on credit, income, employment history, assets, etc. This part of the process is carried out by the bank.
Closing Costs
-Expenses incurred by the buyer and seller in a real estate or mortgage transaction. (I will get more in depth on this in the next posting)
PITI
-Principal, Interest, Taxes, Insurance
Earnest Money
-A deposit made by a buyer of real estate towards the down payment to evidence good faith. This money is typically held by the real estate brokers or the escrow/title company.
Equity
-The market value of the property, minus the amount of any liens/loans. Equity is often expressed as a percentage of the property value.
Escrow Account
-An account setup through the lender (bank) to hold over monies received from the borrower (buyer) to pay for certain debts. Usually setup for insurance and taxes.
Good Faith Estimate (GFE)
-The form that lists all the charges the borrower must pay at closing. The lender or loan officer is obligated to provide the borrower this form within three business days of receiving the loan application.
LTV
-Loan To Value. The percentage of the amount of the loan to the value of the home or the appraised value of the home. This helps determine the equity in your home.
Mortgage Insurance
-Insurance that covers the lender (bank) incase the borrower (buyer) defaults on the loan. Given out to borrowers that have less than 20% equity in the their home.
Points
-Fees paid by the seller and/or buyer. They can either be origination and discount . 1 point = 1 percent of the loan amount. Example, on a $100,000 loan, 1 point is $1000. Origination is what the loan officer charges the buyer, which can range from 0 points to 1 point. Discount points is what the lender charges the buyer, which ranges from 1 to 3 points.
80-10-10
-Rule for financing a home, 80 is the percentage amount of the home value the lender (bank) will loan up, 10 is the percentage amount the 2nd lender will loan up and 10 is the last amount provided by the borrower (buyer).
80-15-5
-Rule for financing a home, 80 is the percentage amount of the home value the lender will loan up, 15 is the percentage amount the 2nd lender will loan up and 5 is the last amount provided by the borrower (buyer).
Underwriting
-The decision whether to make a loan to a potential home buyer based on credit, income, employment history, assets, etc. This part of the process is carried out by the bank.
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