How to Prepare for Closing Costs

How to Prepare for Closing Costs
by Brandon Cornett

Most home buyers understand the basics of home mortgage loans. They know what a mortgage loan is, how interest works, and other fundamentals of the home loan process.

But when it comes to the closing costs associated with buying a home, many of these same home buyers get caught off guard – by both the variety and total amount of closing costs. By understanding and preparing for these costs ahead of time, you can avoid such surprises.
What Are Closing Costs? Closing costs are the total cost of completing the transfer of ownership of a house. These costs do not include the purchase price of the home. Rather, they are the extras -- fees and expenses aside from the purchase price.

On average, closing costs range between 3% and 5% of the total loan amount. So for a loan of $200,000, closing costs might run $6,000 to $10,000 (3% and 5% respectively of $200,000).
What's Included Within Closing Costs?Closing costs vary depending on where you live and what mortgage lender you choose. But closing costs often include fees for the following
(this list is not all-inclusive):
* Loan origination
* Loan application
* Appraisal
* Document preparation
* Attorney's services* Escrow agent's services
* Pest inspection
* Credit report / processing

Getting an Estimate of Closing CostsThe Real Estate Settlement Procedures Act, or RESPA, requires that mortgage lenders give you a good faith estimate of all the loan-related fees you're likely to pay at closing. They must give you this estimate at the time of loan application. Keep in mind, however, that these are just estimates. Actual closing costs may be more than the good faith estimate closing costs.

Shop AroundIt's a good idea to obtain good faith estimates from multiple lenders. Don't choose a lender based on their interest rates alone. Shop around for estimated closing costs as well.
Just realize that large discrepancies between estimated and actual closing costs are not uncommon. You can prepare yourself for this by having enough money in the bank to cover the good faith estimate amount and then some.

A few days before closing, you will receive another document called a settlement statement, or "HUD-1 statement." This document will give you a more exact tally of the closing costs you'll be expected to pay at closing.

ConclusionClosing costs include a wide variety of fees and charges. They can add up to a sizable amount, so it's important to prepare for them in advance. Be sure to factor closing costs into the equation when looking for a mortgage lender. Proper planning can help you avoid unpleasant surprises on closing day.

Questions Buyers Should Ask Home Inspectors

10 Questions Buyers Should Ask Home Inspectors(July 5, 2006) --

Help your customers enjoy a high level of service from the service providers involved in their transaction. With inspectors, they should ask:

1. Will your inspection meet recognized standards? Ask whether the inspection and the inspection report will meet all state requirements and comply with a well-recognized standard of practice and code of ethics, such as the one adopted by the American Society of Home Inspectors or the National Association of Home Inspectors. Customers can view each group’s standards of practice and code of ethics online at www.ashi.org or www.nahi.org. ASHI’s Web site also provides a database of state regulations.

2. Do you belong to a professional home inspector association? There are many state and national associations for home inspectors, including the two groups mentioned in No. 1. Unfortunately, some groups confer questionable credentials or certifications in return for nothing more than a fee. Insist on members of reputable, nonprofit trade organizations; request to see a membership ID.

3. How experienced are you? Ask how long inspectors have been in the profession and how many inspections they’ve completed. They should provide customer referrals on request. New inspectors also may be highly qualified, but they should describe their training and let you know whether they plan to work with a more experienced partner.

4. How do you keep your expertise up to date? Inspectors’ commitment to continuing education is a good measure of their professionalism and service. Advanced knowledge is especially important in cases in which a home is older or includes unique elements requiring additional or updated training.

5. Do you focus on residential inspection? Make sure the inspector has training and experience in the unique discipline of home inspection, which is very different from inspecting commercial buildings or a construction site. If your customers are buying a unique property, such as a historic home, they may want to ask whether the inspector has experience with that type of property in particular.

6. Will you offer to do repairs or improvements? Some state laws and trade associations allow the inspector to provide repair work on problems uncovered during the inspection. However, other states and associations forbid it as a conflict of interest. Contact your local ASHI chapter to learn about the rules in your state.

7. How long will the inspection take? On average, an inspector working alone inspects a typical single-family house in two to three hours; anything significantly less may not be thorough. If your customers are purchasing an especially large property, they may want to ask whether additional inspectors will be brought in.

8. What’s the cost? Costs can vary dramatically, depending on your region, the size and age of the house, and the scope of services. The national average for single-family homes is about $320, but customers with large homes can expect to pay more. Customers should be wary of deals that seem too good to be true.

9. What type of inspection report do you provide? Ask to see samples to determine whether you will understand the inspector's reporting style. Also, most inspectors provide their full report within 24 hours of the inspection.

10. Will I be able to attend the inspection? The answer should be yes. A home inspection is a valuable educational opportunity for the buyer. An inspector's refusal to let the buyer attend should raise a red flag.

Source: Rob Paterkiewicz, executive director, American Society of Home Inspectors, Des Plaines, Ill., www.ashi.org.

Kansas City Realtor

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6 Simple Ideas for Beautifying a House

6 Simple Ideas for Beautifying a House (July 3, 2006) --

When potential buyers look at a half-dozen similar homes, chances are the one they will buy is the one they consider the “prettiest one,” says Mark Nash, real estate professional and author of "1001 Tips for Buying & Selling a Home."

Here are a half-dozen tips for making sure that your customer’s home is the prettiest.
Strip away the window coverings – especially heavy drapes – and replace them with simple shades, then have the windows cleaned by a pro.

Update lighting fixtures. Replace stodgy chandeliers and ceiling fixtures with something contemporary.

Remove all the old wallpaper. Some home buyers won’t consider a property if there is wallpaper on the walls.

Get rid of ratty furniture and rent new pieces if necessary.

Neutralize kids’ rooms – remove the evidence that the child is a boy or a girl.

Get rid of all of the family pictures.

Source: St. Paul Pioneer Press (07/01/2006)

40 Year Mortgage Gaining Proponents

40-Year Mortgage Gaining Proponents(July 3, 2006) --

The 40-year mortgage is gaining moment, says Keith Gumbinger, vice president of financial industry research and publishing firm HSH Assoc."These loans have really come back in the last six, seven months," Gumbinger says. "And for certain borrowers, they can help improve affordability."The payment difference between a 30-year mortgage and a 40-year mortgage isn’t huge. For instance, a $300,000 loan at 6.5 percent, amortized over 30 years, costs about $1,896 per month, while the payment for a 40-year loan is $1,756.A plus for 40-year mortgage is that generally the lender locks in the rate. So while it is unlikely that they’ll actually have the loan for 40-years – most buyers stay in a house seven to nine years – while they have it, they can feel secure, points out Douglas Duncan, chief economist for the Mortgage Bankers Association of America. The best customers are young buyers, says Dennis Yeskey, who leads the real estate capital markets industry group for Deloitte & Touche USA, "These borrowers go into it thinking that five years from now they'll be making a lot more money, and if they sell then, it's a whole new market."

Source: The New York Times, Bob Tedeschi, 07/02/2006)