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When people think of buying a home, they usually think of closing costs as being hidden fees to pay, and perhaps never even know about, until they get their first bill. Plentii understands that closing costs can be prohibitive, but there is a way that you can find out what they are before you pay them. Here is a look at what they are and how you can find your closing costs before closing on the house.
Closing costs are non-refundable fees paid at the closing of a real estate transaction. This point in time is usually when the seller tells the buyer what the trade's total cost will be. Closing costs consist of recording fees, title insurance, appraisal, escrow, and attorneys' fees. The amount varies according to state laws.
Escrow is the money that the escrow officer keeps for any outstanding loans on the property. They will collect these from the buyers. The title insurance protects the lender from possible liens on the house.
An appraisal will determine the value of the home, using this for closing costs. All of these fees are paid before the transaction closes.
A lienholder will hold onto a deed of trust for a specific time after paying the closing costs. The lender uses this to protect him from loss if a borrower defaults on the loan. An attorney's fee is paid by the homebuyers when they apply for the loan. The closing cost typically adds one to two percent to the loan amount for the first year of the homebuyer's mortgage.
The closing cost typically varies, depending on the type of loan taken out and the type of mortgage being used. Homebuyers can find closing costs to be anywhere from two to three percent of the home's purchase price. Mortgages are typically for fifteen or twenty years and do not require any upfront fees. Homeowner loans are generally for thirty years and need an initial lender commitment, but there are no closing costs associated with these loans.
Unsure about your Mortgage plan? Our agents are ready to help you. Mortgage plans may also include closing fees in points, or standard closing costs depending on the type of plan. The points, or interest rate, that the buyer will pay towards their loan can vary depending on the state where they make the purchase. Some lenders will add closing fees to the mortgage payment each month. In many cases, these fees are tax-deductible.
Some buyers will pay all of these fees themselves. Other buyers will need to use a third party to help pay for these fees. Closing costs typically include:
- Mortgage insurance
- Title search fees
- Private mortgage insurance
- If a private lender is involved, property assessment fees
- If a home is located outside of the county, the house is purchased in
- Completion of home inspection fees before purchase
- And down payment assistance fees.
Some buyers will need to use a VA loan company to pay for closing costs. Closing cost financing is not considered a sales contract, so it is not subject to a credit check or collateral verification.
The buyer additionally cannot exceed the amount of secured debt on the home purchase. VA closing costs typically come in the form of a one-time payment, which is returned when the home purchase is completely paid off. Still unsure what’s next for you and your mortgage lender, are you protected if the primary breadwinner of the family dies? In that case, the surviving spouse can decide to pay the remaining mortgage balance or leave it in the hands of the mortgage protection insurance policy. This decision should be made carefully. Contact a Plentii agent today!
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Borrowers who leave the loan balance in the lender's hands could run into financial trouble should their living costs suddenly increase due to unemployment or medical emergencies. On the other hand, if the spouse carrying the mortgage balance lives until the policy expires, the borrower will not receive any death benefits should they pass away. The policy will then lapse, leaving the lender with a large unpaid mortgage balance.