NewBuyer Blog » home closing

Housing Closing Costs – What you Need to Know

Elizabeth Dennis — Sun, 20 Mar 2011 11:47:39 +0000

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.

Good Faith Estimate and HUD-1 Forms Get a Face Lift

Elizabeth Dennis — Fri, 22 Jan 2010 19:44:27 +0000

Perhaps you’ve heard the story from family, friends or colleagues; their unfortunate tales of unexpected costs and fees that surfaced in the days leading up to, or even on the day of their home closing. You may be wondering how did your friend’s closing costs end up being so much higher than originally presented by their lender. Will this happen to you? Fortunately, the answer is “no.”

As of January 1, 2010, The U.S. Department of Housing and Urban Development (HUD) has adopted new rules to which mortgage lenders must adhere. These rules were adopted to eliminate surprises at closing.

A Standardized Good Faith Estimate

Lenders have always been required to give borrowers a listing of all expected closing costs in the form of what is called a Good Faith Estimate (GFE). Before now, there was no consistency with the GFE forms. Each lender could use its own version; presenting different information in a different manner.

Now, lenders must use a standardized, three-page form. This form must be presented to you, at no charge, within 72 hours after you apply for a loan. The form is very well laid out and documented in easy-to-understand terms.

The highlight of the new GFE is that it clearly spells out:

Charges That Cannot Increase
There are a handful of fees that lenders are now forbidden to change. These are the ones that they can control; such as origination fees and processing fees.
Charges That in Total Cannot Increase More than 10%
Fees from third party services (selected by your lender) such as appraisals, surveys, and title insurance will not raise more than 10%. If for whatever reason, your lender exceeds these 10% tolerances, he must reimburse you.
Charges That Can Change
Your initial escrow deposit, daily interest, homeowners insurance, and third party services chosen by you are not subject to the10% maximum as the lender does not have control over these factors.

The GFE must also include features of your loan that could drive up your mortgage costs at some point in the future. These might be an adjustable rate loan, balloon payments, pre-payment penalties, etc. The dollar amount of these changes must be disclosed to you.

Trading Upfront Costs for a Lower Interest Rate

Agreeing to pay additional points in exchange for a lower interest rates and vice versa is common practice. You will now be able to see a clear chart, called a tradeoff table, that details how this exchange will affect your monthly payments. See exactly what your loan will look like with lower settlement charges and what it will look like with a lower interest rate. It is all laid out right before you.

Take a look for yourself. See a sample of HUD’S Good Faith Estimate.

A Much Improved HUD-1 Settlement Form

A “HUD-1” is the common real estate settlement form used by closing agents. The HUD-1 form itemizes all charges imposed upon a borrower and the seller of the home. It gives both parties a complete list of their incoming and outgoing funds. The problem with HUD-1 forms was that they bore little resemblance to the costs originally presented on the GFE. To make things worse, these HUD-1 forms only need to be given one day before closing. You can imagine your panic if the numbers on the form are not what you expected.

Today’s HUD-1 form is a fantastic upgrade. A section titled “Comparison of Good Faith Estimate and HUD-1” is an extremely helpful feature. Just as the heading states, you are able to compare line-by-line the costs on your original GFE to those on the HUD-1. It couldn’t be clearer. This section is broken down by those costs that cannot increase, those that can increase by 10%, and those that may increase; just as we’ve seen on the GFE. Here is a sample of the HUD-1 form.

Mortgage Shopping Made Easier

Not only will these new guidelines and forms reduce shock on closing day but your Good Faith Estimate will serve as great tool for mortgage comparison shopping. You can now compare apples-to-apples as you will have in hand the total cost of all fees from each lender and each lender’s GFE will have the exact same information.

Whew. Don’t you feel better now?

Closing on Your Home

Elizabeth Dennis — Mon, 18 Jan 2010 03:12:19 +0000

A detailed look at the process of closing on your new home. Learn about the contract, a good faith deposit, contingencies, the inspection, and the requirements for the closing including: a title search, title insurance, a survey and homeowners insurance. View the costs of closing on a home.

From the resource about the contract: “Once you’ve found a home, made an offer and the seller has accepted your offer, the seller’s agent draws up a contract specifying the terms and a closing date. When you sign this contract, you have officially agreed to purchase the home.”

Source: Practical Money Skills

Learn more about home closings at Newbuyer.com.

Understanding Closing Costs

NewBuyer — Wed, 13 Jan 2010 13:24:48 +0000

An essential guide to understanding home closing costs. Descriptions of lender fees, third-party fees and government fees are well documented. From the resource: “Generally, the buyer pays for closing costs – but this can be negotiated with the seller. Your lender should provide a good faith estimate of your closing costs within three days of applying for a mortgage. Here are some common closing costs.”

Source: USAA

Read More About Closing on a Home at Newbuyer.com

The Closing Process

NewBuyer — Wed, 06 Jan 2010 23:00:21 +0000

An insightful example of ten steps outlining what typically happens during the home closing process. The steps encompass earnest money, title check, homeowner’s insurance, disclosures, inspections and contingencies, appraisal of property, loan approval, equest to payoff seller’s existing mortgage, cashier’s check, “signoff” & closing appointment, final steps. Although these exact steps are specific to the resource, they provide a general understanding of the closing process.

Source: ZipRealty

Read More About Closing on a Home at Newbuyer.com

The Closing Meeting

NewBuyer — Wed, 06 Jan 2010 15:22:31 +0000

Guidance on what to do and expect before and during the closing meeting. Discussed is who attends the mortgage closing, (i.e. the home buyer, the home seller, closing agent, title insurance representative, escrow agent, and the real estate agent). Also mentioned is the number of steps involved between the offer being accepted and the closing process.

An example from the resource is about setting the closing date: “The closing date is set when your mortgage is approved and you sign a commitment letter with your lender. Make sure the closing date is before your lock-in rate expires.”

Source: Freddie Mac

Read More About Closing on a Home at Newbuyer.com

Closing on a Home – How to Be Prepared for Closing Costs

NewBuyer — Tue, 22 Dec 2009 17:00:23 +0000

A solid look into how to prepare for costs associated with your home closing. The question of “why are there closing costs?” is answered, the importance of planning for closing costs is stressed and the fact that closing costs are negotiable is explained.

From the resource: “Closing costs are a necessity of buying a home, but there is no reason for anyone to get ripped off in the process. As long as the buyer can afford the home they are purchasing, there is plenty of time to track such costs and plenty of room to negotiate a deal that satisfies the buyer, the seller, and the mortgage provider.”

Source: NewHomeGuide.com

Read More About Closing on a Home at Newbuyer.com

Down Payments and Closing Costs Defined

NewBuyer — Fri, 04 Dec 2009 13:00:10 +0000

A high quality look at the definitions of a down payment, closing costs and private mortgage insurance in reference to the home closing process. Learn that a down payment for a home can be between 3% and 20%. The resource will help you decide how much of a down payment works for you. See what factors make up closing costs and whether you will need to purchase private mortgage insurance.

Source: Freddie Mac

Read More About Closing on a Home at Newbuyer.com

A Guide to Closing on Your New Home

NewBuyer — Thu, 03 Dec 2009 04:18:53 +0000

A first class guide to closing on your new home. Learn what happens leading up to the closing, how to set a closing date, what happens at the closing, common home closing problems and what happens after the home closing.

From the resource: “Everyone has heard terrifying stories of closings gone wrong. While there are reasons for problems on closing day, the majority go smoothly. The keys to a good closing are knowing what to expect, planning ahead, and staying organized.”

Source: NewHomeGuide.com

Read More About Closing on a Home at Newbuyer.com

Closing the Purchase of Your First Home

Elizabeth Dennis — Thu, 19 Nov 2009 17:10:47 +0000

A high-quality look for first time home buyers at the details surrounding a home closing. Information is provided about where the closing will occur, the exact documents involved, how the money will exchange hands and when you will get your keys to your new home.

From the resource: “It (the closing) can seem very daunting especially to the first time home buyer. However, if the closing has been properly prepared, you will sign a number of documents and celebrate the purchase of your first home.”

Source: SoLongLandLord.com

Read more about closing on a home at Newbuyer.com