An Insider’s Look at Mortgage Closing Costs and How to Minimize the Amount You’ll Pay

When buying a new home, you may be focused on finding a morthttps://i0.wp.com/smartblogcontent.com/i/An_Insiders_Look_at_Mortgage_Closing_Costs_and_How_to_Minimize_the_Amount_Youll_Pay.jpggage program that has a down payment requirement that is manageable for you. However, some home buyers will overlook the costs that they are responsible for at closing. These costs can vary, but it is common for home buyers to pay between two to three percent of the loan amount in closing costs, if not more. This can be a hefty sum of money that you will need to budget for. The good news is that there are some steps that you can take to keep these costs to a minimum.

Shop For a Title Insurance Company

There are numerous fees that will be listed on your closing statement, but one of the highest fees is the title company charge. The title charges vary from company to company. Most lenders and real estate agents have preferred title companies that they want to work with, but you typically have the ability to shop around and compare the fees. You simply have to inquire what the lender’s or real estate agent’s preferred title company is and what the fees are. Then, you can shop around to find a better deal.

Consider Your Escrows

Another large expense on your closing statement will be the prepaid taxes and insurance as well as the escrows for these amounts. One idea is to ask your lender to waive escrows. This request is not always granted, but it can drastically reduce the amount of money you need to pay for out of your pocket at closing. You can also shop around for a better deal on property insurance to lower your escrow expense.

Ask the Seller to Pay for Closing Costs

While you are ultimately responsible for many of the closing costs, you may be able to structure your sales contract so that the seller pays for some or all of the costs. This is generally something that may be negotiated at the time the original offer is made, but you could also submit a revision request to the contract through your real estate agent.

Understanding what the closing costs are and which costs can be negotiated or shopped around for is important. You can also look at how gifts from the seller or other parties can be used to reduce your out of pocket expenses when buying a new home.

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What You Should Know About Closing Costs

closing feesIt can be a surprise for some first-time home buyers how much they will need to have available for closing costs. While it is common for the seller to pay closing costs, depending on negotiations, the seller and buyer may split the costs of closing, or the seller may pay for all closing fees, especially in for-sale-by-owner situations. I recently saw a helpful article that breaks down the various costs that make up closing costs. To help you prepare for this possible expense, read on to learn more!

Real Estate Broker Commission/Fees: This amount is a usually calculated as a percentage of the sale price, and covers the cost of the realtor’s services, and is typically paid by the seller.

loansLoan Fees: This would be any costs associated with gaining a home loan: processing fee, underwriting review, loan origination fee, loan discount, appraisal fee, credit report fee. Most reputable mortgage companies won’t charge application fees or other charges upfront.

Prepaid Items: There are often items that the lender will require you to pay at or before closing date. This can include interest (from the day of closing through the end of the month), mortgage insurance premium, hazard insurance premium (also known as homeowner’s insurance, the first year is paid in advanced to ensure the coverage), and flood insurance (if flood insurance is necessary, this covers the first year’s premium).

title homeTitle and Closing Charges: The following fees cover some of the administrative costs that may involved in closing.

  • Settlement/Closing Fee
  • Abstract of Title, Search, Title Examination, Title Insurance Commitment or Binder
  • Document Preparation
  • Notary Fee
  • Attorney Fee
  • Title Insurance

Recording/Government Filing Fees: This covers any fees that are involved in filing the property and loan information with the county courthouse or other local recording office.

Other Charges: Some lenders and title insurers may require a survey or an inspection.

Remember, closing fees can differ depending on where you are purchasing a home, so please don’t hesitate to contact me if you have any questions about this final transaction.

When is the best time of the month to close?

closingYou may have heard that it is best to close on your home loan at the end of the month. While closing at the end of the month does have some advantages, it really depends on your situation. Read on to learn if closing at the end of the month, or possibly at the beginning of the month, is a better option for you.

A major deciding factor for if you should close at the end of the month depends on if you are purchasing a home or refinancing a home.

If you’re purchasing a home…
home buyingIf you’re purchasing a home, you will pay interest for every day that you are in the loan. It’s true that if you close at the end of the month, you will pay less days of interest on the day of your closing but the first loan payment will be due in a little over 30 days. However, closing at the beginning of the month also has advantages. Although you will be paying more days of interest on the day of closing, you will be skipping closer to two monthly payments instead of one. If you have a good realtor who negotiated for the seller to cover some or all of your closing costs, the seller may pay the interest due at the closing.

If you’re refinancing a home…
When you refinance a home, you will be paying the old interest rate for the first part of the month, then the new interest rate for the rest of the month after closing. So if you are refinancing into a loan with a lower interest rate, you will save on interest by closing at the beginning of the month.

Things to consider…
costsKeep in mind that you may not always be able to control the time of the month at which you close. Consider that the seller may also want some say about when closing will take place. It’s important to stay flexible, especially if you are purchasing a foreclosure or short-sale. Also, be sure to take into account holidays, as they could possibly delay closing.

If you have any further questions about what the best time of the month to close is, or other home financing topics, please do not hesitate to contact me.

When is the best time to buy a second home?

buying a second homeAs many of us know, it’s never too early to start planning for retirement. There may soon come a time when you find you are financially stable enough to purchase a second home and you may be wondering when the best time is to do so. Whether your retirement is coming up soon, or you’d like to use a second home as a vacation home until the time comes, a second property can be a great investment.

As an experienced Kansas City mortgage lender, I frequently help my clients with their important questions about financing a home, or second home. Here’s a few considerations when deciding if it’s the best time to buy a second home.

  • Do your research. Since you’re under no pressure to move, you have plenty of time to check out the area, talk to locals, hire a local realtor, and really figure out what it will cost. Use my mortgage loan calculator to help you during this process.
  • If you’re not retiring for a while and will use the home as a vacation home, ask yourself: is owning a vacation home less expensive than hotels? Depending on how much and how long you typically vacation during the year, this could be a real consideration.
  • Can you rent the home as an income property until you’re ready to live there on a more permanent basis?
  • Consider extra costs like utilities and maintenance.
  • Make sure you know all the financial benefits and potential downsides to owning a second home. Use my mortgage tax savings calculator and come speak to me about any of your questions.

Buying a second home for retirement or enjoyment can pose some risks, but also some great benefits. I always have my clients’ best financial interests in mind, so if you have any questions about buying a second home, please do not hesitate to contact me today.

The Advantages of Relocating vs. Renovating

new_construction_buchachon_450Is it better to buy your dream home or remodel your current home?

As a mortgage lender with years of experience, this is a question I hear a lot. While both purchasing a new home and remodeling your current home require certain expense, which is the better option?

 

 

The advantages—and disadvantages—of remodeling your current home

87761149_XSThe most important consideration when deciding whether to remodel vs. relocate is the return on investment. If the total remodel cost is less than the difference of the before and after estimated cost of the home, remodeling may be in your best interest. However, if the renovations add up to more than the end value of the home, a remodel is certainly not in your best interest, financially. Another thought to consider is that remodeling can occasionally be more complicated than starting over with your dream home. Existing building codes and wiring or plumbing obstacles may not be worth the time and cost.

The advantages of buying a new home

new-homeownersThough this may be the more expensive route, buying a new home has its advantages. While moving can be a pain and buying a new home has associated transaction costs, a few of the benefits of buying vs. remodeling include:

  • Familiar financing processes: You know the process of buying and your real estate agent and mortgage lender are there to guide you through the process and offer valuable advice. With a remodel, you are typically on your own.
  • Tax advantages: Use my mortgage tax savings calculator to compare tax savings of buying vs. remodeling
  • More (or less) space: A remodel can only do so much to add space, and reducing space is not really a viable option. A new house may be the answer to your space issues.
  • A fresh start: Buying a new home in a new city or neighborhood provides you with a chance to start fresh and build the life you want.

Contact me today with your mortgage questions and needs!

There are many factors to consider when deciding whether to remodel vs. relocate. Feel free to contact me with any questions you may have about your mortgage, refinancing, and anything else!

Buying a Home for Retirement

retirementAccording to the National Association of Realtors, half of all second-home buyers are over the age of 46. Each month, over a quarter of a million Americans turns 65. For those on their way to retirement, it’s important to consider what type of home will be right for their future.

Find an “Age-Friendly” Second Home

open floor planWhen looking for a second home in which to retire, be sure to look for houses with universal design, like open floor plans, wide doorways, and unobstructed entryways that won’t inhibit your mobility. If you are considering two-story homes, look for those with a master bedroom on the first floor to eliminate the amount of stairs you’ll have to go up and down each day. Walk-in showers, level thresholds, and handles with levers instead of knobs are other features to be aware of.

Check Out the Area

1270842485It’s always important to research the area surrounding your new home, no matter your stage in life. However, when you’re approaching retirement it’s especially necessary to locate nearby hospitals, as well as accessible recreational areas to enjoy. If you’re looking at homes located in vacation areas, make sure to find out of the town shuts down during the off-season.

Double Up

For_Rent_Sign1Still working for a while? You might also think about purchasing your retirement home now as an investment and use it as a rental property. Be sure to consult your CPA about tax issues and contact me about the various mortgage options for such a situation.

As always, I am here to assist you with any questions you may have about buying a home for retirement. Click here to contact me today!

The Benefits of Investing in a Second Property

For_Rent_Sign1Investing in a second property can be beneficial in a variety of ways. If the property is in a popular vacation area, your family may be able to enjoy spending time there in addition to renting the property for others to enjoy while you bring in some extra cash. If you’re considering investing in a second property, check out a few of the benefits below and contact me for more information about mortgages, pre-approval, or any other home financing needs.

Additional Income

Extra cashExtra income is one of the most obvious benefits of investing in a second property. Renting your income property allows you to receive rental income when the property is occupied by tenants or guests which can result in an extra income, after some regular maintenance costs are taken care of.

Financial Security

Real estate investments can be a way to provide you with some financial security in a not-so-certain future. In the event that you fall on some hard times, it can be beneficial to know that you still have options to fall back on. Another key benefit is asset allocation. According to this article from Investopedia, “Real estate returns have relatively low correlations with other asset classes (traditional investment vehicles such as stocks and bonds), which adds to the diversification of your portfolio.”

Potential Tax Benefits

tax-deductionsInvesting in a second property can provide several tax deductions for insurance, maintenance, property taxes, and more (source). You may be able to offset many of the costs of owning a rental property through the many tax benefits, making investing in an income property an incredibly smart move.

If you are interested in investing in an income property, contact me today

Choosing to invest in a second property is a huge commitment, but with a good mortgage lender and advisors, it can offer great benefits as well. Utilizing useful tools like my mortgage calculator tool can also help you predict how much to expect mortgage payments to be on your property. If you are ready to move forward in investing in a second property, click here to contact me today. I’m looking forward to hearing from you.

Helpful Tips for First-Time Home Buyers

approved-mortgage-loanMany first-time home buyers are unsure of where to begin the sometimes confusing process of purchasing their first home. I strive to make this process as simple as it can be so that first-time home buyers feel that the process was rewarding, educational, and an overall positive experience. If you are interested in becoming a homeowner, here’s a few helpful tips for first-time home buyers.

Get prequalified for a home loan

Knowing how much you can spend before you even start is the best way to keep the process simple and pain-free. Falling in love with a house you cannot afford is no fun for anyone involved, especially the home buyer. Use my convenient mortgage loan calculator to get a sense of monthly payments at various terms, interest rates, and home costs. This will help you get a better sense of what your monthly mortgage payments will be. If you’re ready to get prequalified, just click here to start the process!

House and Keys in Female HandsThink long-term and keep the big picture in mind

When buying your first home, think about how long you plan to stay there. If it’s only a few years, keep re-sale in mind. For example, even if you do not have kids, keep in mind that bad school districts or busy streets could hurt the re-sale value of the home (by as much as 20%), as you’ll have to rule out families with children from the potential buyer pool. Keeping the big picture in mind can also help narrow down the houses you are interested in. Hire a good inspector and make sure that the house you are buying won’t come with a long list of renovations and improvements to make.

Keep a home and neighborhood checklist

Writing out a checklist of all your needs and wants for both the house and the neighborhood before you even begin looking is the best way to ensure that the house you buy is everything you required. Set emotions aside in this checklist, bring a copy along to each home you look at and check items off and make notes as you go. Be sure to thoroughly check out the neighborhood as well. Drop by during different times of day to get an idea about what’s really happening around the home you are looking to by. Find out how close it is to grocery stores and other services, make sure you can handle the commute, and get the overall lay and feel of the land.

couple_looking_at_homeFirst-time home buyers, contact me today

If you are a first-time home buyer, be sure to contact me today. I can help with prequalification, finding the right home loan and rate, and I provide the knowledge you can rely on to make the process of buying your fist home as easy as possible. To get in touch with me, please click here. I can’t wait to work with you!

Ready For a Bigger Home? Here’s a Few Considerations

bigger homeWhen either your family or your income has outgrown your current home, it may be time to consider trading up. If the house in which you are currently living is your starter home, you may be unsure of the current market and what is the best route to take. You may also be asking when is the right time to buy a bigger home is, and if it’s even the right move for you. Here are a few thoughts to consider when deciding to sell your current home and upgrading to a larger one:

Can You Afford it?

how-big-of-a-house-do-you-needObviously, buying a bigger home means you’re going to be spending more money. When determining if you’re ready for a bigger home, it’s absolutely crucial to consider whether you can handle a larger mortgage payment and the additional cost of upkeep on the extra space you’ll have.

Luckily, I have a great tool for you to use: a Mortgage Loan Calculator. This is an excellent tool estimating how much of a monthly mortgage you can afford. You just enter the total amount of your mortgage, the term, and the interest rate, and it will automatically calculate your monthly payment to help you determine what you can afford and get you started on making a budget.

You should also get pre-qualified for a house loan so you know approximately how much you can borrow before you begin looking for a new home. Click here to get started on your pre-qualification today.

Can You Sell Your Current House?

If you own your current home, without a mortgage or liens, you’re in a great position to upgrade to a bigger home. If you have enough money to purchase a new home without depending on selling your current home, even better for you! However, most people are not in this situation and they must sell their current home before they can buy a bigger one. If you’re considering moving to a bigger home, get your current home on the market as soon as possible and make sure it’s got the best chances of selling.

first-time buyersWhat’s the Right Neighborhood and House for You?

Make sure you do lots of research on the areas you’re considering moving to. How are the schools? How close is the nearest grocery store? What style of home do you prefer? Upgrading homes may not always refer to just size, but also an upgrade in amenities, aesthetics, or location. Doing your homework can be beneficial in making sure you’re not overpaying for a home (even if you can afford it) and helping you compare the pros and cons of individual homes if you’re torn between a few.

Still Have Questions? Contact Aaron Rourke Today.

Determining whether or not it’s the right time to buy a bigger house can be challenging. If you’re still unsure about what’s best for you, or if you want to gain a better understanding of your options, do not hesitate to contact me by clicking here.

The Importance of Getting a Pre-Approved Home Loan

Many first-time home buyers might think the logical order of purchasing a home would be to first search for and decide upon a home, and then begin the loan process. Unfortunately for them, this is not the case. When a seller is considering bids, they will look for candidates that are already pre-approved or at least pre-qualified. This lets them know that the process of completing the sale will go smoothy. A seller might not even consider you without a lender’s pre-approval letter, and many realtors won’t show you properties without it.

What’s the Difference Between Pre-Qualified and Pre-Approved?

If you’re confused about the difference between being pre-qualified and pre-approved for a home loan, you’re not alone! Let’s straighten out this issue so you’re educated and prepared.

pre-qualifiedPre-Qualification is the estimation of your borrowing power. This is a fairly easy step and one of the first in the mortgage process. A lender like myself will evaluate the data you provide including your income, debt and assets. Pre-qualification does include analysis of your credit report. I offer free pre-qualification on my website. You can get started by clicking here. Once the evaluation is complete, we can discuss the type of mortgage that may be right for you.

pre approvedPre-Approval is issued by a lender after a comprehensive analysis of the creditworthiness of the applicant. This is the more involved, next step in the mortgage process. You will complete a mortgage application and supply me with documentation to run an extensive financial background check and review of your credit rating. I can then inform you of the specific mortgage amount for which you are approved.

If you have questions about the difference between pre-qualification and pre-approval, give me a call! You can start the pre-qualification process online by clicking here. Once you complete the form, I will contact you to help you with the next steps in your home buying process.