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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 closing costs.

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 need upfront.

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 application.

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 costs?

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 costs?

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) 974-2163.

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 zoning.

A Clear Path to Closing On Your New Home

A 2018 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.

Make 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.

Make sure you understand the need to pay all bills on time, particularly during the mortgage process.

Make 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.

Make 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.

If you 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.

Working together we can minimize the stress for buyers and instead keep the focus on the excitement of buying a new home.

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