What to expect when closing on a mortgage loan
Purchasing a home can be a pricey endeavor. Then when you add on all of the extra fees beyond the price of the home...well that can make buying a home downright overwhelming. The solution: Go into the home buying process with your eyes wide open about the not-so-little "extras" that come with being a homeowner.
In addition to having a nice lump sum available for a mortgage loan down payment, you'll also need to have extra cash available for the following:
- Lender Fees - This set of extra costs may include, but is not limited to mortgage broker fees, underwriting costs, points, and loan origination costs. You may also be responsible for pre-loan qualification costs such as credit reports and appraisals.
- Insurance - While some forms of home-related insurance premiums can be paid in monthly increments, others require payment in full or a lump sum initial payment at closing. Types of insurance that you may need to budget for include title insurance, private mortgage insurance, standard homeowner's insurance, and special homeowner's insurance such as flood or earthquake insurance.
- Taxes! - Being a homeowner come with its perks...and its penalties. The home, of course, is the perk and the property tax associated with owning it is the penalty. It's common for borrowers to elect to pay taxes in a lump sum annually but some real estate transactions will require that taxes be paid during closing.
Select borrowers may be able to negotiate to have some of these fees rolled into the cost of the loan. However, most of you will end up paying a majority of the fees as part of your mortgage loan closing costs. Also, it's important to realize that every real estate transaction is unique and the fees listed above can vary greatly. So, be prepared! It's always a good idea to have a mortgage lender provide sound quote of what your mortgage loan payment will be-with all extra fees / costs included-and an itemized list of the fees to be paid at closing.
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