The Funds Needed at Closing .. and How They are Figured
Most new mortgage clients I speak with have pretty basic concerns regarding their upcoming financing. One of the questions I hear most often is ...
How much money will I need at my Closing?
A simple and quick answer might be provided by the following math equation:Down Payment + Closing Costs/Pre-Paids
=
Total Funds to Close
But unfortunately, it's typically not that simple. Here's why ...
While the above equation is an appropriate starting point for buyers/borrowers, the actual amount of funds needed at the time of Closing often decreases during the time of mortgage processing.
How? Often, during the processing of a mortgage or prior to Closing taking place, some items or fees get paid for.
Two (2) such fees are:
- The Appraisal Fee
- The Homeowner's Insurance First-year Premium
Other items and services may also be accounted for AT CLOSING, in the form of Credits due from the Seller:
Examples of these include:
- Real Estate Taxes (Due from the seller)
- Earnest Money paid (Essentially, an advance towards the down payment, paid by Buyer)
- The Seller's Portion of Title Insurance (in some States)
The amount you owe at the time of Closing can also fall should the following items be applied towards Closing Costs/Pre-paids:
- Seller Credit
- Lender Credit
As you can see, the simple equation provided above becomes much more complicated as your mortgage progresses. While the down payment portion of the equation typically remains pretty straightforward, the amount owed for additional fees can change ... or be decided upon ... as your mortgage process progresses.
Once those decisions are made, the monetary difference that remains is funded either by the Loan Amount requested or ... you guessed it ... via another equation:
Purchase Price - Loan Amount = Down Payment
Below you'll find examples of the Closing Costs you might encounter. (Costs vary by State and/or Mortgage Lender. Talk to me to receive definitive Costs for your Chicagoland/IL/WI financing.)
Examples of Closing Costs followed by the Entity charging those fees :
- Appraisal Fee - Borrower (Pre-Pays Lender @ Application)
- Real Estate Transfer Taxes - Per RE Contract (IF paid) (Paid @ Closing)
- Escrow/Settlement Fee - Title Company (Paid @ Closing)
- Title Insurance - Title Company (Paid @ Closing)
- Recording Fees (Mortgage, Deed) - Title Company - (Paid @ Closing)
- Attorney Fees (In certain States) - Attorney (Paid @ Closing)
- Flood Certification Fee - Lender (Paid @ Closing)
- Origination Fee - Lender (Paid @ Closing)
- Credit Report Fee - Lender (Paid @ Closing)
- Processing Fee - Lender (Paid @ Closing)
- Underwriting Fee - Lender (Paid @ Closing)
- Discount Points (IF paid) - Lender (Paid @ Closing)
Pre-Paid Items include:
- 1st Year Homeowners Insurance Premium
- Impounds for Real Estate Taxes and Insurance
- Homeowners Association Dues (IF applicable)
- Interest Charges (Varies with Closing Date)
- Mortgage Insurance (IF applicable)
Once again, the lists above aren't an all-inclusive list of what you as a Buyer/Borrower might encounter in your individual transaction. Local or state practices may add or subtract to the costs presented here.
But the lists make one point very clear: Borrowers need to be aware that there will be extra costs that accompany buying their home beyond their down payment and future monthly mortgage payments. And they need to plan for them.
There are several different ways to do that. That's where I (your Mortgage Originator) come in.
Prior to entering into a Real Estate Contract: Contact me. We will discuss all options available to you. That way you know and thoroughly understand the costs needed when you buy and finance a home ... and you can make the wisest decisions moving forward.
No surprises encountered. Just a stress-free and successful home buying and Closing experience ...
* Hoping to Buy or Refinance a Home in New Lenox or elsewhere in the Chicagoland area? Contact me! I'll put my 40+ years of Mortgage experience and expertise hard to work on your behalf.
I can be easily found at:
I can be easily found at:
Gene Mundt
Mortgage Originator - nmls #216987 - IL Lic. 031.0006220 - WI Licensed
American Portfolio Mortgage Corp.
nmls #175656
Direct: 815.524.2280
Cell or Text: 708.921.6331
eFax: 815.524.2281
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