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What are closing costs?
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Closing costs include
- all broker and lender charges
- title charges, property taxes, homeowners
insurance
- and so forth...
These fees are summarized
in a Good Faith Estimate
Good Faith Estimate:
A summary which allows the borrower to see the amount of money needed to close their purchase transaction all in one place.
- In the case of
a refinance, the borrower has the option of
paying for the closing costs or wrapping them
into the mortgage.
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What is an escrow account? |
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Escrow
Account:
Special account set up to hold money to
pay for property taxes,
homeowners insurance, and mortgage insurance.
- An escrow account is typically required if
the first mortgage is less than 80% of the
total loan to value.
- The lender requires that property taxes,
homeowners insurance, and mortgage insurance
be paid monthly with your mortgage payment.
- These monies are disbursed from your
pre-paid escrow account as the charges
come due.
- It can be a great way for a new homeowner
to budget for taxes and insurance, because
the borrower does not need to come up
with these charges in a lump sum annually.
- If a borrower does not wish to have
an escrow account, there are many options
to waive this requirement.
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| How long does a typical
transaction take from start to close? |
With interest rates at record lows, the
length of time to close a transaction has
increased a bit. The average purchase transaction
is taking approximately 30 days to close
and a refinance about 45 days. As interest
rates continue to rise special accommodations
can be made to expedite a loan closing.
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| Why do I need an inspection and
an appraisal? |
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The
inspection is not typically a lender requirement,
but I strongly recommend that the buyer
obtain a home inspection.
- A home inspection lets the buyer know
if there are any repair issues that need
to be resolved prior to closing.
- The home inspector may recommend an
additional inspection if problems outside
of his/her area of expertise are identified
(e.g. roof, pest, dry rot, chimney inspection).
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Please take these recommendations seriously.
An appraisal is required for the lender.
- Appraisers are not licensed inspectors,
so they are not looking in depth at the
home.
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The appraiser's job is to ensure (for the lender)
that the buyer is paying the correct price
for the home.
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Appraisers evaluate homes sold in
the area in the previous 6 months and report
their finding in a comprehensive report.
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