How
Much is too Much for Closing Costs?
Something
that is very important for you to take into consideration when purchasing
or refinancing
your home is the closing costs.
I
would love to tell you that closing
costs are not expensive, but believe me they are. Once you add up
all the fees’
involved, such as points,
taxes,
title
insurance, county
costs and various other fee’s, it really begins to add up.
The
first thing you need to understand is that nobody works for free, so be
prepared to pay at closing.
The
total amount of fees’ depends on quite a few things. For instance,
the percentage of loan origination
fees’ (points)
the lender
is going to be charging you. Another large fee is the title
search and insurance.
The title
fee varies by state and is determined by the amount of the home.
Closing
costs on average should not exceed 5% of the total amount of the purchase
price, and this does not include the down
payment.
The
total amount of these fees’ does not all go to the lender. Generally
only the loan origination
fee and the application
fee go to the lender.
The
rest of the fee’s such as the appraisal,
credit
report, interest
for the period in between closing and your first monthly payment, home
owner’s insurance, title
insurance, pro rated property
tax, etc., go to their appropriate institutions.
Before
you go to closing, the lender is required by law to send you a Good
Faith Estimate (GFE).The
GFE discloses an accurate estimate of all the fee’s you will be
responsible for at closing.
Make
sure you go over the GFE with a fine tooth comb, and if there are any
fees’ you don’t understand, call your lender or broker and
ask for an explanation.
As
I stated earlier, you must be prepared to pay closing costs. Closing costs
are not cheap, but you should not pay a penny more than what is required.
If
your closing costs are somewhere between two and 5% of the amount of the
mortgage, you should be in good shape. If they are drastically higher,
consider finding another lender.
Remember,
do your homework. Put yourself in a position to understand all the jargon
that fills up all the paperwork
you will be signing. Also, take your time and shop around, always look
for the best rate at the lowest possible price.
Closing
Costs Part2
Back
End Points
Good
Faith Estimate
Origination
Fees
Points
On Your Loan
ARM
Loans
Payments
Toward Principal
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