Posted by Elizabeth Dennis on April 9, 2011 | No Comments
Refinancing your home loan can be a great way to save hundreds of dollars in interest over the life of the loan and reduce monthly costs at the same time. However, it is important to recognize that the act of refinancing can cost several thousand dollars as there are fees which have to be paid upfront with cash or rolled into the new loan. If you have an idea of what to expect, however, you can get a general idea of how much a refinance will cost you and whether it is worth the money and the hassle.
In general, a homeowner can expect to pay anywhere from two to three percent of the loan amount when refinancing a home loan in closing costs. This amount is made up of various fees which you will encounter when refinancing. The most prevalent fee is the refinance loan application fee. This will cost the homeowner anywhere from $250 to $500. The lender closing fees are also tacked on and average about $750 nationwide. There are also settlement fees which can tack on an additional $350. Depending in which state you live, title examination fees can range from $150 to $450. Title insurance will also vary from state to state and will run about $225 to $400. Refinancing also takes a lot of documentation and the fees for preparing those documents can run from $200 to $400. There can also be fees for home inspections, mortgage insurance and hazard insurance.
The above amounts are only estimates and can vary greatly depending on your lender and state. In some cases, it will pay to shop around for the best rate especially when it comes to title insurance a title search. You may also be able to save money if the work related to the mortgage is still current. For example, this could include fees for surveys or inspections. Before you commit to any loan or start the refinancing procedure, it may be a good idea to talk to a real estate professional or lawyer in order to get a better idea of the fees which you might be facing. In some cases, you may not have the cash available to go through with the refinancing at that particular moment and would find it better to wait until you can save a little bit more.
An important thing to consider when going through a refinance is to pay attention to the time of the month. When the refinance closes, there will likely be some outstanding interest on the old loan. For example, if you close on the 15th of the month, you will have fifteen days of interest due on the old loan and about fifteen days on the new one. Your first payment would not be due until the first of the next month because you will have pain the previous month’s interest in the closing costs. These are just some extra fees that can get tacked on that most people don’t think about.
Posted by Elizabeth Dennis on March 20, 2011 | No Comments
Buying a house is not as easy as finding the one you want and then getting a loan to pay for it. Instead, there are numerous additional expenses called closing costs. At closing, the buyer becomes the official owner of the house. This can involve numerous people from lawyers to real estate agents and most will have some sort of cost for their participation or services rendered. This is where housing closing costs come in and they can run into the thousands of dollars.
Keep in mind that not costs are the same. They can vary by hundreds of dollars depending on which part of the country you live in. However, there are some rough estimates you can follow to get an idea of how much closing is going to cost. First, be sure to get a good faith estimate from your lender. Take this estimate and compare it to an online closing cost calculator. If you are coming up with a big difference in fees, be sure to bring any questions up to your real estate agent and lender before signing any documentation at the closing.
There are numerous housing closing cost fees. For example, expect to pay between $50 and $100 for a credit report. You will have to have the house you are looking at appraised and that will cost between $200 and $400. The recording and notary fees will cost between $50 and $100. Escrow fees are some of the most expensive and can be as high as $800 or as low as $200. All of the documents have to be prepared and the cost of doing so can run up to $100. You must have a house inspected before you buy it and that can tack on an additional $150 to $250. Transfer fees are generally up to $100 and lawyer fees can run up to $500. In all, you could find yourself paying close to $4000 in fees as you close on your new home.
But what happens if you find yourself short of cash at the closing? In this case, it may be possible to roll the fees into the loan. However, this can only be done under certain circumstances. If you didn’t spend all the money the bank was willing to lend on the house, then you can just add in the closing costs with little problem. If, however, you are close to the loan-to-value ratio, then you might need to get a little more creative. If you have already reached the maximum LTV, you may need to ask for a seller concession. Here, you go up on the agreed on selling price by 6% or so. Then the seller “gives” the buyer back that six percent for closing costs. For example, if you get a loan for $90,000 on a $100,000 home, the buyer increases the price by 6%. The buyer then puts down $10,600 rather than $10,000 and the loan is increased. The extra money is then used to pay the closing costs. An easier way to have the costs taken care of is to find a very motivated seller who is willing to pay all the closing costs for you.
Posted by Elizabeth Dennis on March 6, 2011 | No Comments
Thanks to the housing market collapse, it is now a little harder for those who are self-employed to get a home mortgage. However, if you do plenty of legwork beforehand and have the credit history and income to back up your documentation, the dream of owning a home can still be a reality.
If you self-employed and looking for a mortgage, the first thing you must do is be very honest with yourself about what you can and cannot afford. This is especially true if you are dealing with low or no-documentation loans because it can be easy to fudge the numbers a little bit. You are the only one who truly knows the ebbs and flows of your business and if you can afford the house that you really want.
Once you are certain that you can make the payments, there are numerous things the self-employed can do to make themselves more attractive to lenders. First, you will want your credit score to be the highest it can possibly be. Be sure to get a free credit report and check for any inconsistencies or mistakes and have them corrected immediately. Those with a score over 730 have a better chance of getting a much lower rate, thereby saving themselves thousands of dollars over the course of the loan.
Secondly, put down as much as you can safely afford to do so. This will make you much more attractive to a lender and you will be less likely to walk away from a home with more money invested into it. Next, have some significant savings in the bank. This will show lenders that even if you do fall on hard times, you will have plenty of money to pull from in order to keep up with the payments. In addition, you will want to pay off any consumer debts such as credit cards. This will not only free up money for positive cash flow, but it will make it easier to qualify for a higher loan amount.
Lastly, have an established track record of self-employment. Typically, banks and other lenders will want to see at least two years of documentation.
Speaking of documentation, those who are self-employed will find themselves having to present more of it than traditional workers. Since you won’t have W-2’s to present, you may find yourself having to show at least two years worth of tax returns, profit and loss statements, business credit reports, balance sheets and documentation which shows your income.
It may also be easier to qualify for a loan if your spouse has a traditional job and a W-2 from their employment. Because you will be sharing the house, this provides peace of mind that there is a steady income in which to fall back on if need be.
Lastly, be sure to find a lender, either via a bank or mortgage broker, who specialized in loans for the self-employed. Typically, they will know which type of mortgage will work best for your particular situation and know where to look to get the best rates.
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