FAQ #2 ....... What Do You Mean I Need Money For Closing Costs?

Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

Anna 'Banana' Kruchten has established a new ActiveRain contest in which we are to respond to the 10 most frequently asked questions that we are asked, and we are to do this in 10 different blogs. My first blog was "What Do I Need To Do To Get Pre-Qualified For A Mortgage".  Today's blog will be about a question that I get more often than you might think.

FAQ #2 ....... What Do You Mean I Need Money For Closing Costs?

First Time Homebuyers know that money is needed for Downpayment.  What many of them don't realize is that they will also need money for Closing Costs.  Even for those who are not surprised to hear that they they will have to pay Closings Costs, they are surprised to hear that Closing Costs can run them several thousand dollars.  Yes, there are ways to cover the Closing Costs and Downpayment without using their own funds, but it is the surprise that there will be funds needed other than Downpayment that is unexpected.

I am always prepared for silence that follows when we reach this point in the Pre-Approval Process, and I know that I have to take the time to fully explain it.  When Closing Costs are explained correctly, and they understand it, the initial shock goes away, and the discussion turns to how to best handle these unexpected costs.  That discussion might be the topic of a future FAQ blog, but for now I want to give a rundown of Closing Costs that are common to all mortgages.  Let me also stop and state at this point, that for the purpose of this blog the term Closing Costs is an all inclusive one, it includes Prepaid Costs as well.  Borrowers don't care what category the costs fall into, they just want to know what they are for and what is their total cost.

  • Application Fee/Processing Fee
  • Appraisal Fee
  • Attorney Fee
  • Title Insurance Fee
  • Recording Fees
  • Daily Interest Charge
  • Homeowners Insurance
  • Escrows:
    • Taxes
    • Homeowners

There could be other Closing Costs such as:

  • Points
  • Credit Report
  • Flood Certification
  • Funding Fees
  • Condo Questionnaire Fee
  • Re-inspection Fee

To just name a few, but the first list of fees are common to every mortgage.  These costs can easily add up to several thousand dollars regardless of the loan size, because many are fixed cost.  Looking at the fees above someone might say, well they don't have to escrow for taxes and insurance, but I don't know of a lender around here that will not require that they be escrowed these days

I had planned on my next FAQ's blog to be about Credit Scores.  But while listing the above fees, it reminded me of a question that always comes up with regard to insurance fees.  So I think that will be the topic of the next FAQ's blog


Previous FAQ's Blogs.

"What Do I Need To Do To Get Pre-Qualified For A Mortgage"



  Info about the author:

 George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

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 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Old Saybrook, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or souto@snet.net


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Al & Peggy Cunningham, Brokers
RE/MAX West Realty Inc., Brokerage - Brampton, ON
Our Family Wants To Help Your Family!

Excellent information George. We are sure you do get quite a pause that more money is needed than the downpayment from Buyers. We ourselves explain to all prospective buyers the cost beforehand, but we know that isn't the norm.

May 17, 2012 10:42 AM #1
Ginny Gorman
RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI
Homes for Sale in North Kingstown RI and beyond

George, this is an excellent topic for the consumer...many first time home buyers don't have a clue that they have these costs and their mouths just drop open.  It makes all the difference to explain it right away...good share.

May 17, 2012 11:08 AM #2
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

George ~ I am amazed how often this question comes up.  I also am amazed how some loan originators fail to outline these costs for buyers.  One significant fee in NH which often is not explained it the transfer tax which is 7.50 per side (buyer/seller split 50/50) per $1000 of purchase price.  It can be a lot of additional money.

May 17, 2012 12:15 PM #3
Nick T Pappas
Assoc. Broker/Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, @HomesBirmingham & Providence Property Mgmnt, LLC Hun... - Huntsville, AL
Madison & Huntsville Alabama Real Estate Resource
George, With new home buyers I see that "look" on their face when I bring up the subject of closing costs...you're about the explanation going a long way towards understanding.
May 17, 2012 12:57 PM #4
Brenda Mullen
RE/MAX Access - Schertz, TX
Your San Antonio TX Real Estate Agent!!

Excellent post George.  This is always the "fun" part of the conversation for me when I bring up buyer costs...and they are surprised that they have to have any money.  Along with their closing costs, I tell them about the earnest money, option money (here in TX), and inspection fees.  

It costs money to buy a home :)!  Suggested!

May 17, 2012 01:04 PM #5
Debbie Gartner
The Flooring Girl - White Plains, NY
The Flooring Girl & Blog Stylist -Dynamo Marketers

great post George and yes this is a surprise 4 many. here in NY it seems that the taxes icl nys mortgage tax is the largest portion

May 17, 2012 09:00 PM #6
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

George you are right on the money most buyer's don't realize the amount of money needed to close a loan.

May 17, 2012 09:28 PM #7
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

I have done a couple mortgages recently, where these folks got grants from the city they were in, that covered the the down payment and the closing costs. There are really tricky, as all the math has to be perfect, in the beginning, otherwise, they become real problems.

Thank you for sharing the post with all of us.

May 17, 2012 09:56 PM #8
Beth and Richard Witt
Long Island Cash Home Buyer - Huntington, NY
Long Island Cash Home Buyer 516-330-6940

Great post George... The thing with these closing costs is they keep changing that's why when we are asked that question we give a quick overview and then set up a consultation appointment with our mortgage folks...

May 18, 2012 07:40 AM #9
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George Souto

Your Connecticut Mortgage Expert
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