Closing Costs With Your Mortgage
Posted by: admin in Real Estate, tags: Applying For A Mortgage, Appraisal Fees, Closing Costs, Escrow Fees, Escrow Instructions, Insurance, Money, Real Estate, Rest Of Your Life, Thousands Of Dollars
When applying for a mortgage, it is important to understand that you are going to be responsible for paying costs associated with it. The fees are known as closing costs and can add up quickly.
If you have never applied for a mortgage before, you may be under the impression that it is a simple scenario where a lender gives you a big chunk of change and then expects a monthly payment for the rest of your life. In fact, the lender is going to want some money paid up front. This money comes in the form of closing costs and they can accumulate pretty quickly. While closing costs vary from real estate deal to deal, here are the ones you can expect to run into.
Lender’s Fees can be a harsh wake up call when it comes to closing cost. A lender is going to charge you fees for the origination of your loan and they can be very high. The fees can be attributed to process, underwriting, credit checks and a host of odd little tasks. They can add up quickly to thousands of dollars, so make sure you get a written quote from the lender before applying.
Appraisal Fees are a near constant when it comes to closing costs. As the name suggests, these fees are paid to an appraiser who values the home you are going to purchase. Technically, the fees are not really closing costs because they are paid at the time of the inspection, but they are generally grouped as such when closing costs are discussed. The amount of the fee depends on the property and part of the country you are in. Fees of $300 to $600 are pretty typical.
Title and Escrow – These two fees are nearly always present in any real estate deal. Title refers to the title insurance a lender will require you to obtain. Escrow refers to an independent third party that will act as an agent to hold document and money and issue them as well per the escrow instructions agreed upon by the parties. The fees for title insurance depend on the property while escrow fees vary from area to area.
Impound Accounts are not per se a closing cost, but they are something you should be aware of. The exact nature of an impound account depends on the lender’s requirements. In loaning you money, a lender may require you to pay PMI, homeowner insurance premiums and property taxes in to an impound account. Obviously, these numbers can grow pretty large, particularly with property taxes. It is important that you gain a full understanding of what will be required of you in this regard as buyers can be cash poor after escrow and run into trouble trying to meet the impound obligations.
If it is your first time applying for a mortgage, don’t be startled by all of the fees mentioned above. The key is to educate yourself on what is required for your specific situation and then go into the deal with your eyes open.
By: Raynor James
What Is Private Mortgage Insurance?
Posted by: admin in Real Estate, tags: Bad Reputation, Calculate Mortgage, Half A Percent, Home Loans, Insurance, Insurance Cost, Insurance Homeowners, Mortgage Loan, Pmi, Private Insurance
Private mortgage insurance or PMI as is known is a form of insurance new homeowners are required to purchase. This is particularly so if their down payment is 20 percent or less of the property’s valued price or sale price. The main reason for private mortgage insurance is to protect lenders in the case the new homeowner defaults on their home loan.
Although private mortgage insurance has a bad reputation since it only protects lenders, it is actually a good thing. Reason is it has allowed millions of people to be able to buy homes with smaller down payments. Previously, these people would not have been able to afford a home had the down payment remain the same. Another important reason is private mortgage insurance can help you qualify for home loans.
Cost of Private Mortgage Insurance
The cost actually varies depending on the mortgage loan and the monthly down payment. Usually, it is half a percent. To calculate your private mortgage insurance, you can use this estimated formula:
Annual private mortgage insurance = 100 – (percentage of down payment paid) * (sale price of house) * 0.05
Let’s take an example. Suppose you brought a $500,000 house. You pay a 20 per cent down payment. So using the formula as above:
Annual private mortgage insurance = (100 – 20) * $500000 * 0.005 = $2000
Your monthly mortgage insurance will be around $167.
One important point to note is you should always keep track of your payments and notify your lender when you have reached 80 percent equity of your house. Even though the Homeowner Protection Act requires lenders to notify you of how long it will take you to pay, it is still better to keep track of it yourself.
There are some cases where lenders make homeowners continue their private mortgage insurance all the way through the lifetime of the loan. This usually applies to high risk borrowers. Therefore your payment history and credit rating such as your FICO score plays an important part as well.
Some people hate paying private mortgage insurance for years. There are some ways around it.
One way is to pay more interest on your home loan. Some lenders will waive the private mortgage insurance requirement if you agree to pay a higher interest rate. Since mortgage interest is tax deductible, it can be a good idea to go ahead.
Another way to avoid paying private mortgage insurance is to prove to the lender that the value of your home has risen. If the value of your home has risen significantly, your home have already have the 20 percent or more equity you need to cancel the mortgage insurance. However, it does take time for the lender to verify your claim, sometimes as long as a year.
By: Ricky Lim
Basic Mortgage Terms
Posted by: admin in Real Estate, tags: First Few Years, Home Insurance, Insurance, Interest Interest, Interest Rate, Lenders, Mortgage Payments, Mortgage Terms, Principal And Interest, Property Taxes
If it is your first time applying for a mortgage, there are a number of terms you should know. Educating yourself on the various mortgage terms you will run into will help you make better decisions when deciding which home you want to purchase. When you sign a mortgage contract, your home is used for collateral and it is your responsibility to make sure your payments are made on time each month.
The first term you should know is principal. The principal is basically defined as the amount of money you borrow for your home. Before the principal is provided you will need to make a down payment. A down payment is the percentage you will put towards the principal. The amount of the down payment will often depend on the cost of the home. Once you pay off the principal, the home is yours.
The next term you will need to know is interest. Interest is a percentage that you are charged to borrow a certain amount of money. Along with the interest rate, lenders may also charge you points. A point is a portion of the total funds financed. The principal and interest makes up the majority of your monthly payments, and this is a method that is called amortization. Amortization is the method by which your loan is reduced over a given period of time. Your payments for the first few years will cover the interest, while payments made later will be applied towards the principal.
A portion of your mortgage payments can be placed in an escrow account in order to go towards insurance, taxes, or other expenses. The next term you will hear a lot is taxes. Taxes are the amount of money that you have to pay to your state or government. When it comes to your home, these are known as property taxes. These taxes are used to build roads, schools, and other public projects. All homeowners must pay property taxes.
Insurance is another important term that you will hear in the real estate community. You will not be allowed to close on your mortgage if you don’t have insurance for your home. Home insurance covers your home against floods, fire, theft, or other problems. Unless you can afford to repair your home if it is damaged, it is usually a good idea to get insurance for your home. If your home is located within a zone that is known for having floods, federal laws may require you to have flood insurance.
If the down payment you put towards your home is less than 20% of the total value, you will often be charged additional premiums on your insurance by the lender. This is done to protect you in the event that you default on your loans and fail to make payments. Without this, many people would not be able to afford a house. Once you have paid off about 78% of the home, the lender will stop charging you insurance premiums.
These are the basic terms you will need to know before your purchase a home. Understanding these things will allow you to avoid many of the pitfalls that exist in the real estate field. You want an interest rate that is low, and you should always try to get a fixed interest rate if possible. This will allow you to focus your income on making payments towards the principal, and this will help you pay off the loan faster. A mortgage is an important part of your financial picture, and you want to make sure you pick a home that you can afford. If you fail to make your payments, you may lose your house.
By: Joseph Kenny
