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PURCHASE REQUIRES CASH BEYOND DOWN PAYMENT
Prepare To Jump A Variety Of Cash Hurdles At Settlement
Making a down payment isn't the only cash challenge you'll face when purchasing
your next home. Closing costs and other fees can add up to several thousand
dollars more, depending on the loan and home you choose.
Be certain you go into the home-buying process with enough cash for settlement.
Here are some costs you may be responsible for (others may come into play):
- Loan or discount
points. A point is 1% of the loan amount. You may want to pay as
many as 4 points to reduce the interest rate on your loan.
- Loan origination
or service fees. Sometimes expressed as points, these fees can run
$500 or more.
- Loan application
fee. This non-refundable fee is often required with the loan application
and may or may not cover other items such as credit report and appraisal
fees. Cost: Up to $500.
- Credit report.
Usually costs about $50. Often paid early in the process.
- Appraisal fee.
Averages around $300, often payable before settlement.
- Home inspection.
The size and style of the home will affect cost. Budget $300 to be safe.
- Title insurance.
You'll be required to purchase a lender's title insurance policy, and
it's wise to purchase a separate policy for yourself. Total cost: $150
to $300.
- Prepaid interest.
Paid at closing for each day between the settlement date and the end
of the month. Buyers often schedule settlement near the end of the month
to reduce their cash outlay.
- Pre-payments
to escrow. Many lenders require a pre-payment at closing for up
to 6 months of property insurance, and 6 months of property taxes, depending
on the time of year you close.
- Recording fees
and transfer taxes. These vary by locality. Budget about $200.
- Attorney's or
settlement agent's fees. Budget $250.
Every lender is required
by federal law to provide you with a Good Faith Estimate of your closing
costs within three days of your loan application. Note however, that it
is an estimate-the final numbers are likely to differ at settlement.
There are ways to roll some of your closing costs into your mortgage loan,
minimizing your cash outlay. For example, you could structure your purchase
contract so the seller pays most of your closing costs in exchange for
a higher sales price.
Contact us to find out more. We'll be happy to help you win the cash game
on your next home purchase.
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