Understanding home closing costs is not impossible. Mortgage closing costs can creep in on you if you are not aware of them.
Find the best explanation of these fees here.
These fees can really
hammer you. By being prepared ahead of time, you avoid the surprises
most receive at closing. It's like having your house in the red by using an estimating calculator!
One advantage to checking out these fees ahead of time is comparison shopping. By doing this estimating you can compare a variety of Good Faith Estimates, or GFEs as they are sometimes called, to evaluate the best deal for you.
Recently HUD changed the regulations regarding GFEs to make it easier to compare mortgage fees and closing costs of lenders. However, most lenders believe this has just made it harder and more expensive for buyers.
At least comparing apples with apples was supposed to be easier. But it is a way of getting an estimate!
A GFE is just that, an estimate made in good faith. This means that your lender will pledge to you that the estimate given on this document is roughly what you will be paying when taking out a mortgage with them.
This cost could go up or down, either way, once you get to the closing. One of the new regulations says that the cost cannot go up at the time of closing, even though there are a few exceptions to this.
By estimating closing costs for yourself before the final closing, you are better able to determine which lenders are giving you the better deal.
You can do this by adding together the loan application fee, origination fee, document preparation, accounting service fees, and flood insurance coverage if you need it. If an inspection is required to determine if you need this protection, be sure to add that in as well.
You should also include the points you may be paying. One point equals approximately one percent of the money borrowed to purchase a home. Notary fees should also be figured in, along with wire transfers fees, home appraisals, surveys, courier service fees, and all other inspection fees. First time buyers often overlook these when they estimate closing costs themselves.
Don't forget to add in title fees, property taxes that may have to be paid at closing and homeowner's insurance premiums for a full year.
Since your lender requires homeowner's insurance at closing, you will want to shop for the best price with the most benefits.
You may even need to add in the fees for a real estate attorney if your state requires it. If you are paying less than 20% down, you may even have to add private mortgage insurance to the list.
Are you paying at least 20% down against the total purchase price of the property? Good, then you do not have to worry about PMI. If you are not, another one of your mortgage closing costs may be PMI insurance.
You pay this insurance fee until your loan's outstanding principal is less than 20% of the property value.
When estimating closing costs, it may be a relief to know that the average is about $4,000, but there are several factors that help determine this. Those factors are; the size of the loan, interest rate, state and county regulations, and type of loan.
As you estimate closing costs subtract any costs that will be paid by a third party. Sellers may contribute all or part of these costs. You cannot avoid many of these costs, but you may not be responsible for them.
When comparing apples for apples, go to page 1 of the GFE and you will find a list of fees. Now compare these fees with the other GFEs and see which lender gives you the best deal.
Would you like some help? Perhaps a personal coach to guide you through the process is what you're looking for. For free coaching, fill out the questionnaire here. Then you will be contacted and offered the assistance you seek.
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