The following mortgage sale closing tips will help prepare home buyers to take steps before sitting around the table to sign necessary mortgage documents. Be a proactive buyer and protect your interests to ensure you are being dealt with fairly while receiving the best deal possible.
About the Closing
Closing costs include fees, costs and taxes connected with the purchase of your home, the borrowing of funds and the preparation of paperwork needed to finalize the sale. Be aware that closing costs vary from deal to deal. Some of the factors playing a role in closing costs include:
- Location of your new home
- Type of property being purchased
- Price of the home
- Complexity of the transaction
- The practices of the lender
Mortgage Sale Closing Tips
Of all the mortgage sale closing tips to keep in mind the first should be a reminder to work closely with your real estate agent and lender during the preliminary steps involved in the process of purchasing your home. You should receive a good faith estimate from your lender within three days of applying for your loan. This outlines an estimate of the fees you'll be expected to pay at closing. Talk with them about the possibility of the seller giving you a credit for your nonrecurring closing costs. These are costs paid on a one-time basis at closing and include:
- Title insurance
- Transfer taxes
Don't expect the seller to pay more than they should. Lenders limit how much a seller can credit a buyer to between 3 and 6 per cent of the purchase price, and the amount can't surpass the existing amount for nonrecurring closing costs.
Here are a few more items you should plan to discuss:
Lower Your Interest Rate By Paying Points
The amount paid in points is a one time fee that can vary from 0.5-3 points. This fee is calculated based on the amount of the mortgage loan. One point equals one percent of the mortgage loan amount. As the buyer you have the option to pay this fee up front at closing or to roll the cost of points into the loan, depending on the regulations of the lender. This reduces the ongoing cost paid by the homeowner over the life of the loan with a lower interest rate. Discuss with your mortgage consultant the merits and drawbacks resulting from paying points according to the current interest rates.
Question Line Items
When you apply for your mortgage loan the mortgage company provides a list of fees to expect. This is called a good faith estimate. The mortgage company is not held to this estimate, however, and when closing time comes fees can potentially be much higher and new fees may have been added. Have a copy of your original estimate and compare the two. Question the changes and weed out any possible junk fees.
Additional Closing Fees
Additional fees include a variety of costs including:
- Appraisal fee
- Cost of credit reports
- Hazard and Mortgage insurance
- Interest accrued between closing and the end of the month
Look at the last item on the list. Request that your closing take place late in the month and you will save on closing costs due to the lender for interest accrued for the remainder of the current month. The fewer days left in the month, the less you pay at closing.
Financing Your Closing Costs
If you don't really have the cash to pay for your closing costs talk to your lender. Some mortgage lenders will permit borrowers to finance part or all of the closing costs. Whether your finance the closing costs or not, the important thing is to be aware of what you are paying and why. An informed consumer makes wiser choices and might even catch an error prior to closing.