All these fees for a mortgage can become very confusing. With many claiming a no closing cost mortgage you need to know the truth. Understand exactly what home closing costs include and more. Avoid the scams.
They can help you understand how these no closing cost deals work. I'm not saying it cannot be done, it can be done but you need all things to fall in place just right.
You and I both know that money does not grow on trees. Or does it??
Some lenders try to say this when it comes to a home closing cost. I know you've heard the advertisements, "no closing cost mortgage" or "no closing cost home loan."
Now think about this for a moment. Can such a thing really exist? Would a lender really help me out and not charge me any mortgage closing cost? Yea, right! Guess again! Although the lenders may be the ones who thought up this idea, mortgage brokers have certainly used it to their advantage.
I want to share with you some important details here. You can expect to learn:
Plus I'm going to help you find ways to get your mortgage closing cost paid by someone other than yourself. Since after reading in this module you'll see for yourself that the no closing cost mortgage is a myth, you may want to know this info.
Just below, I'm including a screen shot of the top of a good faith estimate (GFE) to help you understand the typical closing costs for a mortgage. This shows section 800 of the GFE.
I'll be referring to it by line number below.
This GFE is for a $53,000 mortgage.
Please study over this section and notice that lines 801-812 all have descriptions and figures on them. This is the typical mortgage closing cost.
You'll notice there is an origination fee on line 801, discount on line 802 and so forth. The amounts may vary depending on the size of the mortgage of course.
Here's a line by line breakdown of these fees:
Now in the above example, notice the fees on the lines that do not have a number. This is where you will find those other fees that may or may not have a place for them in the lines above.
Let me explain, the IFC Admin Fee in this example could have been put under line 808 but it was not for some reason. The next line has a combination of fees for the lender. The fees are all lumped together because this is a brokered loan.
Line 809 and 811 are included here plus a flood
certification. I'm not sure what the "Q" is here but I suspect it's a
junk fee added on by the broker. Watch for these type of fees!
Have you every heard the old saying "If it's too good to be true it usually is?" A true "No Mortgage Closing Cost" fits into that saying.
Stop and think about this, every business has cost involved to do business. If they do not cover these costs in the normal course of business, they would not be able to keep their doors open. Simply put, no profits, no business! So they work the fees in someplace. Usually in the interest rate.
Therefore shop your mortgage well. Compare each lenders GFEs to see if your deal really is that good.
Advertisements today lead you to believe there's no mortgage closing cost if you deal with them. There are costs and I just showed them to you on the good faith estimate just above. These are minimal costs on a small mortgage.
If you get a GFE with no numbers on the lines I'm showing you here, then I can guarantee you that your interest rate will be higher than normal. The lender and broker have to be paid to do a loan for you or neither would be around for very long.
So it works this way, either you pay the mortgage closing cost now or you pay it over time in a higher interest rate. Frankly, it's going to be much cheaper for you by paying them in the beginning. This really makes sense when your a first time home buyer and plan to stay in your new home for least 5-7 years.
In most cases it's always to your advantage to pay points (part of your closing cost) than take a higher interest rate and not pay any points.
Certain closing cost are tax deductible. I'm not going into a lot of discussion on this since I'm not a tax professional.
I will say this, keep a copy of your final closing statement (HUD-1) handy for when you file taxes the year after you buy your house.
Whatever you save on taxes is better in your pocket than Uncle Sam's! A penny saved is a penny earned as Benjamin Franklin once said. Only this will translate into dollars not just pennies.
The average mortgage closing cost on a home mortgage range from 3%-4%. This varies, of course, depending on what state you live in.
Some states require lawyers to handle your real estate closing and they of course have to get their part. These greedy little pups get paid to do nothing more than slow things down in my mind, but never the less, it becomes a part of your mortgage closing cost.
Below is a link for a closing cost estimator. Play around with it some and see if it helps you out. This will open into a new window.
FHA home loans are unique in how they work your closing costs. They are one of the best I have found in keeping home closing costs to a minimum.
Take the time to estimate your own cost for your mortgage by using this handy online Closing Cost Estimator.
Learn four tips to know if a No Closing Cost Home Loan is the real deal or a scam by reading this page.
Understand what is involved in How to Estimate Closing Costs.
Every mortgage deal is different but there are some aspects that are the same on every deal. Learn what these are by reading Average Closing Costs.
Unfortunately, you should watch for unnecessary closing costs. You can learn how to avoid these by reading the page on How to Avoid Unnecessary Closing Costs.
Be sure to read FHA Closing Costs to find out how their costs are unique.
The buyer is responsible for some of the closing costs. Discover which home loan closing costs the buyer pays by reading Typical Buyers Closing Costs.
Two terms you hear with home closing costs are sellers closing costs and sellers concessions. What is the difference between these two terms? Learn this difference and what the seller portion of the closing costs are by reading the article Difference Between Sellers Closing Costs and Sellers Concessions.
Are you a visual learner? Would you like to see a video to help you understand the Good Faith Estimate? Here is a free video for you at Good Faith Estimate Explained.
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