Buying Your Home - Escrow & Closing Costs
How can I save on closing costs?
Studies show that the closing
costs, which can average 2 to 3 percent of a total home purchase price, are
often more costly than many buyers expect. But there are some ways to save:
Negotiate with the seller to pay all or part of the closing costs. The lender
must agree to this as well as the seller.
* Get a no-point loan. The
trade-off is a higher interest rate on the loan and many of these loans have
prepayment penalties. But buyers who are short on cash and can qualify for a
higher interest rate may find a no-point loan will significantly cut their
* Get a no-fee loan. Usually, though, these fees are wrapped
into a higher interest rate though it will save you on the amount of cash you
* Get seller financing. This kind of arrangement usually does
not entail traditional loan fees or charges.
* Rent the property in which
you are interested with an option to buy. That will give you more time to save
for the upfront cash needed for the actual purchase.
* Shop around for the
best loan deal. Each direct lender and each mortgage brokerage has their own fee
structure. Call around before submitting your final loan
Who pays the closing costs?
Closing costs are
either paid by the home seller or home buyer. It often depends on local custom
and what the buyer or seller negotiates.
What are closing
Closing costs are the fees for services, taxes or special interest
charges that surround the purchase of a home. They include upfront loan points,
title insurance, escrow or closing day charges, document fees, prepaid interest
and property taxes. Unless, these charges are rolled into the loan, they must be
paid when the home is closed.
Where do I get information about closing
For more on closing costs, ask for the "Consumers Guide to
Mortgage Settlement Costs," Federal Reserve Bank of San Francisco, Public
Information Department, P.O. Box 7702, San Francisco, CA 94120 or call (415)
Why do I need a title report?
As much as you as a
buyer may want to believe that the home you have found is perfect, a clear title
report ensures there are no liens placed against the prior owners or any
documents that will restrict your use of the property. A preliminary title
report provides you with an opportunity to review any impediment that would
prevent clear title from passing to you. When reading a preliminary report, it
is important to check the extent of your ownership rights or interest. The most
common form of interest is "fee simple" or "fee," which is the highest type of
interest an owner can have in land. Liens, restrictions and interests of others
excluded from title coverage will be listed numerically as exceptions in the
report. You also may have to consider interests of any third parties, such as
easements granted by prior owners that limit use of the property. Some buyers
attempt to clear these unwanted items prior to purchase. A list of standard
exceptions and exclusions not covered by the title insurance policy may be
attached. This section includes items the buyer may want to investigate further,
such as any laws governing building and
A Clear Path to
Closing On Your New Home
survey revealed that 42 percent of home buyers found the mortgage process
“stressful” and 32 percent described it as “complicated.” When it comes to having a successful home loan process, there are several
do’s and don’ts to help minimize the stress of
getting to the closing table.
sure you are pre-approved rather than pre-qualified. A
pre-qualification is a review of financial information provided by the
borrower, with no documentation to verify. A pre-approval includes a credit
check and verification of income and assets, and therefore holds more weight
for sellers. Buyers should obtain a pre-approval prior to finding
a home. This provides them with a true mortgage commitment and makes them a
stronger buyer in a competitive situation.
Make sure you as the buyer know where your down payment is coming
from before applying for a home loan. Additionally, money used
for down payment can only come from very specific sources and must be
documented. Moving money into and out of different
accounts during the loan process can result in additional
documentation, which can be cumbersome for the borrower.
sure you understand the need to pay all bills on time, particularly
during the mortgage process.
sure you do not open up new lines of credit to purchase
furniture or appliances for their new home until after the closing. Co-signing
a loan, or anything else that could ding their credit or
increase their debt should be avoided.
sure any job changes are discussed with their loan officer before
application. Typically, the lender wants to see two years of consistent
income history from the borrower when approving a loan.
become aware of either of the above circumstances during the loan process, make
sure you contact their lender immediately. The
lender is required to do a soft credit check up to seven business days prior to
the closing, along with a Verification of Employment for the borrower(s) prior
to closing. Any changes to the buyer’s status
that this reveal could derail the purchase.
together we can minimize the stress for buyers and instead keep the focus on
the excitement of buying a new home.