How much will my closing
How much will my closing
costs be is a question that is at the tip of everyone's mind when they are
buying a home, or refinancing for that matter. How much your closing costs
will be though is going to depend on a variety of different factors. For
example what lender you work with, what loan program you choose, what title
company is used, what type of financing you are doing and a variety of other
factors will determine how much your closing costs will be. The loans that
are advertised no closing costs, do not believe the hype as most of those
simply build the closing costs either back into the loan or back into the
interest rate and charge you a higher rate of interest. Thus, ask the
companies you are shopping around with how much your closing costs will be
upfront. Read on for more info. on closing costs and determining how much
closing costs will be.
This amount is dependent on a number of factors including:
Underwriting or processing fees vary from lender to lender. Compare your Good Faith Estimate from each lender you talk to.
The "Origination" fee on your Good Faith Estimate is the money that you're paying to the broker or loan officer and their company. If you see fees listed in the "Discount" area, make sure that the company you are working with is actually buying your rate down.
Discount points are used to pay the lender additional fees to get you a lower rate. Sometimes, you'll find shady companies that put their fees here to trick you. Make sure when comparings fees from one company to another, that you're comparing apples to apples (Same rate/program, Similar fee structrue, etc.) so that you can clearly see which deal is better for you.
Many brokers will work with you to help you the loan to fit your needs. If you want or need the lowest closing costs possible, or the lowest rate possible let your mortgage consultant know and they can adjust the specifics of the loan accordingly. The lowest closing costs typically result in a higher interest rate, and conversely the lowest rate will come at the expense of higher closing costs. Your broker may also be able to run an cost benefit analysis to determine how long it will take for you to see any benefit from rate buydowns, etc.
Many closing costs are used to pay for certain fees that will come due in the future. Two common examples of fees that often require prepayment are Homeowner's Insurance premiums and Property Tax bills.
Sometimes the lender or mortgage broker will pay part or all of your closing costs and in return you will pay a slightly higher rate on your mortgage.
Closing costs can also vary depending on the time of year you close on a purchase of a new home. The taxes are generally prorated and you may get a tax credit that will lower the amount of your closing costs. The time of year you close determines the amount of your tax credit.
Also, closing towards the end of the month will lower your closing costs. The lender requires you to pay days of interest from the time you close until the end of the month. Closing towards the end of the month lowers this cost.
A good mortgage professional can and should tailor your mortgage needs to fit your immediate and your future plans. If you are looking to refinance or buy a home but you only plan on staying in the home for no more than 2 or 3 years, a no cost loan may be in your best interest. If you have limited or no money available to pay closing costs on a purchase then a no closing cost loan or a loan with a seller concession may be appropriate for you and your situation. However, if you plan on staying in a home for a long time and think you may not have any reason to refinance then paying for your closing costs either up front or rolling them into your loan may be your best option. With all of this said, closing costs can vary not only from lender to lender, broker to broker, and banker to banker, they can also vary depending on what is right for your unique situation. Please consult your personal Ohio mortgage consultant to find out what will be best for you and to explore your different options.
All closing costs should be disclosed on the Good Faith Estimate. However, some unscrupulous loan officers will avoid disclosing some of the costs, or will make the costs seem lower than they actually are. They do this to win your business, and then when the fees suddenly increase at closing, they blame it on 'changes in the market' or some other obscure reason. This is called a 'bait and switch'.
Look out for loan officers who may be using these techniques. If a certain estimate seems particularly low, it may be because you're being lied to. Ask the loan officer about it - perhaps they can provide an explanation. Whatever you do, do not decide to work with a loan officer solely on the basis of who has lower fees. You should also take into account whether or not the loan officer listens to your needs and concerns, and addresses them. You need to work with somebody you trust, an somebody who has your best interests at heart.
Some states may levy taxes on mortgage, which can significantly increase the closing costs for home buyers. These mortgage taxes are usually in a percentage, and depending on the states, they can be as high as more than 2% of the loan amount.
A good approximate value is 3% of the loan value. This is a good value to use if you have not gotten a Good Faith Estimate from your loan officer yet.
Closing costs may vary depending on the loan program that you are going with. Some loans may cost more or less depending on what is required to close the loan.
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Information listed above is to be used for educational purposes only and is not guaranteed