Closing Costs…explained

by | Feb 7, 2016 | Real Estate | 0 comments

Upcoming Free (& non-promotional) Home Buyer Classes:
Monday night, February 8th, 5pm-8pm (ish)
Marshall Community Center, conference room
1009 E. McLoughlin Blvd, Vancouver WA (kitty corner from Clark College)

Saturday, February 13th, 9am-12pm (ish)
Marshall Community Center, conference room
1009 E. McLoughlin Blvd, Vancouver WA (kitty corner from Clark College)

If these class dates and/or times don’t work for you, please let us know.  We understand that you have lives, and families, and work.  We will work something out that works better with your schedule.  Just let us know….
….we also have home seller classes available too…link on left on website

Remember…with reservation…we will throw in lunch, or dinner!  😀
~~~~~~~~~
Hi there!  Happy SuperBowl Sunday

..or in my house…the day I am entering tax receipts to figure out how much I owe the government.  🙁  It’s always a sad day….    I hope you are doing something to enjoy this gorgeous, sunny Sunday!

This week I want to talk about Closing Costs, what they are, and how they get paid.  I am also going to talk quickly (ok, for me) about Open Houses as we come into ‘Open House Season’.  🙂

One thing to remember about open houses (it’s that time of year), is that most agents use them as a marketing tool….as a way to get YOUR information.  An agent will ask for your name, and if you are working with an agent.  They can also ask for your number and/or email address….you do not have to give those out.  If you just want to look at the home without a ‘sales’ pitch, feel free to give the open house agent my name when they ask if you are working with anyone.  Doing so doesn’t mean you are ‘stuck’ with me though  🙂  It should just give you some ‘breathing’ room.  If an open house agent asks you if you have a ‘contract or agreement’ with your agent…well, they shouldn’t be asking that at an open house, but some agents are….well, persistent?  aggressive?  Yeah…  Sorry!  We aren’t all the same….    The open house is supposed to be about the home being held ‘open’, not about the agent getting new clients, however, most open houses are about the agent, and not the home.  🙁  Just something to be aware of…  Remember you don’t have to give out any information you are not comfortable with.

So….on to CLOSING COSTS as this was brought up in question this week….
This week we are going to talk about CLOSING COSTS!  Lots of people talk about closing costs, but most people don’t understand what they are…or how they’re paid.    So what are closing costs then?  Closing costs have two separate parts really…1….the part associated with your loan, and 2…the part associated with the title company and changing the ownership of the home to you..

One thing to remember is that closing costs are not set…in other words…one persons closing costs will not be the same as another persons closing costs.  Why?  Because …1….every person has a different loan based on their credit scores, type of loan, amount of home buying, amount (if any) of downpayment, what day they’re closing (keys) on, interest rate, APR rate, lender they’re using (some have more fees than others), etc…  See how complicated that can get?
So what about the second part?  Well, that can differ as well based on the title company since not every title company charges exactly the same for their individual costs.  Then there is also the costs for the property taxes of the home, time of year you are buying based on when the taxes are due/have been paid, cost of your home owners insurance, amount of loan interest, and more.  Even more confusing, yes?

Ok…now I know you are thinking that this weeks post is pointless then, but really, I have a point!  🙂  My point is that closing costs are variable based on you, your loan, your lender, your (soon to be) new home, and on the title company.  So how do you figure that out?  Well, really no one can figure out HOW much your closing costs are going to be until you have an accepted offer on a home…then we can figure out what your closing costs will be because you will have a home to base numbers off of, a loan chosen, a lender, and the title company picked out.  Most numbers in real estate are a guesstimate until you have all the pieces in place…all the ducks in order…so to speak.

When you are getting pre-approved, your lender will base all your numbers on a guesstimate…what we think your costs are going to be.  Most times lenders, etc will guess high so that the numbers will come in smaller and more affordable for you.  It is always better to look like a hero than a zero!  🙂

I know, I know…still not very helpful is it?  I am sorry.  Closing costs are as individual as you are.  However, 98% of buyers will request the seller to pay for 2%-3% of their closing costs.  Where does that number come from though…

Well…  a FHA loan requires 3.5% downpayment.  FHA is the most common loan type for buyers.  There are some loans, and yes, grants too, that can take care of that down payment for you….meaning a ZERO down loan for you, the buyer.  On average, the costs between title, loan, lender, taxes, interest, insurance, etc….run about 2%-3% of the homes purchase price….rarely does it run more, but it can run less depending on your lender.    When listing a home, I (and many other agents) include seller paid closing costs to the sales price of the home.  This is done because so many buyers request those from the seller, and this way it isn’t a surprise to the seller.  So, yes, most sellers will pay for your closing costs when buying a home. However, in a multiple offer situation the less closing costs you need paid by a seller, the stronger your offer becomes. One thing you need to know though is that if you ask for 3% in closing costs, and the lender only needs 2%, you don’t get that other 1%….it goes back to the seller.  You can’t get cash back from buying a home….unless you are having your earnest money &/or appraisal fee returned to you…this happens if you are using a loan that covers your costs and fees.  Usually your appraisal is part of your closing costs (but paid for at time of appraisal), and your earnest money is applied toward your downpayment.

Again, 98% of the time a buyer will request around 2%-3% in closing costs to be paid for by the seller.  The other 2% of the time a buyer will pay their own closing costs so they don’t have to finance them.  This also means that a buyer has more leverage in reducing the purchase price of the home they want to buy, and can make their offer ‘stronger’.

In short….buyers responsibility for closing costs are:
*Lender’s Title Insurance Policy
*Half of the escrow fee
*Home Inspection
*Recording fees
*First year Homeowners Insurance Premium
* First year Flood Insurance (if applies)
*Pro-rated property taxes
*Survey fee (if required)
*HOA fees (if applies)
*Pro-rated HOA fees (if applies)
*Lender fees;  appraisal fee, credit report, loan origination fee, pre-paid interest, private mortgage insurance

as always….I am available for questions…as is Chris Berg with Pinnacle Mortgage (cberg@pcmloan.com & 503-320-0925 cell).  Chris is including the following information about closing costs to this weeks blog:

“What are closing costs?  Who pays them?  What charges can I expect? What charges real fees and what are junk fees? These are all good questions and you should know the answers to all of them before you make an offer on a home.  Closing costs are a normal part of buying, or selling, a home.  Think about all the parties that are involved in a home purchase (excluding agents as they are paid directly from the seller in our area ).  You have your lender, title company, and appraiser just to name a few.  Your lender has 3rd party costs like credit reports, processing, and underwriting as well.  Then there is your escrow account that pays your taxes and insurance that needs to be paid at closing.  When you take this all into account it is easy to understand why there are closing costs.

Who pays your closing costs?  You?  The seller?  Your lender?  The answer is any or all of these parties can pay these costs.  In most purchase situations the seller is asked to pay your closing costs but remember, this has to be negotiated in your initial offer.  If the seller decides that they aren’t willing to pay your costs and you don’t have the funds to pay them you can ask your lender to.  Your lender has the option to pay fees on your behalf for a slightly higher interest rate.  This option comes in handy when you are in a multiple offer type situation.

What kind of fees are normal and what kind of fees are junk fees?  Good question.  Some lenders ask for an origination fee, usually 1% of the loan amount.  Some don’t have an origination fee but have hard costs like underwriting and processing.  Some have both.  Either set of fees are fairly normal but it is important to make sure that you talk to a reputable lender to make sure you are not paying too much in fees.  Then there are junk fees.  Examples of these types of fees are administration fees, preparation fees, and application fees.

Feel free to contact me about closing costs or any other type of lending questions that you may have! I will be happy to answer them for you.

Chris Berg
NMLS ID/MLO #198082
Mortgage Advisor for Pinnacle Mortgage Bankers A Division of Pinnacle Capital Mortgage-NMLS ID #81395
360-213-1102 office
503-320-0925 cell
360-567-2928 fax
cberg@pcmloan.com

One last thing you need to remember is that a real estate agent is not a sales person.  It is not our job to ‘sell’ you anything.  We are assistants, advisers, guidance, and help.  You should not feel as if your agent is trying to sell you a home, or anything else, our job should be to help you in getting the home you want.  This being said remember that you do not get T-Bone steaks for the price of hamburger…Look ONLY at homes within your budget.  ALWAYS ask questions, and expect answers without a lot of lingo.  I was always told that if you can’t explain something in a way that the other person can understand clearly, it is because you don’t understand it yourself.  🙂

Information is power, and I hope that I am able to help you.  Good luck, and as always…May the odds be ever in your favor out there….  AND If you are looking for a real estate agent, I would love to be able to help you.  

As always….this is just a quick overview…. please remember that your agent, and your lender work for YOU.  You drive the bus…we are merely GPS to help you get to your goals.  Like the classes, this weekly blog email is to help you with your home adventure.  The goal is to be informative and non-promotional.  🙂  We are, however, hoping you will call and want us to help with your adventure.

If you have any questions about this, or something you have heard…or if you would like me to help you with your home adventure, please call, email,  text, or facebook me anytime.  I am, as always, happy to help!

Thank you again for your business and your referrals!!  …and thank you for referring these classes to your friends, family, and co-workers.

.   ..disclaimer…if you have already purchased a home, or would no longer like to receive these emails, please let me know and I will be happy to remove you from any further mailings…

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Have a great day, and I will talk to you soon,
;-D

Tracie DeMars / Realtor

ReMax Equity Group
License# 81289
Vancouver, WA
360-903-3504

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