You may understand that a down payment is typically required to purchase a home, but it is also important to set expectations for closing costs as well. Closing costs help pay to set up the loan, many of the costs are the same at most institutions, and these costs can be paid for in a few different ways. In a nutshell: It is part of your responsibility as a homebuyer to understand closing costs. Closing costs are what you pay to close on a home purchase, set up your mortgage, and fill your escrow account. You should expect closing costs to be between 2% and 3% of the purchase price. Sometimes a seller can contribute to cover part, or all of these costs, however even less known is that your lender can potentially give you credits towards closing costs for taking a higher interest rate. Definition The term closing costs can cover a few things, however my definition is: the total upfront costs of a home mortgage. Closing costs in this article are not to be confused w
If you’re eligible for a VA home loan, it is seriously a great option! As I touched on in The Pillars of a Home Mortgage Application , there is no down payment requirement when purchasing a home and, you won’t need mortgage insurance. The only extra charge by the VA is their very reasonable Funding Fee, more on that below. There are also VA only options when you want to refinance your current VA loan, reach out to me if you’d like to know more about those. In order to help subsidize the 25% guarantee the VA gives on all eligible VA home loans, a funding fee is charged. That’s right, the VA actually guarantees 25% of the loan, that way lenders have less risk when working with a VA borrower, and therefore veterans are more easily approved and more veterans are able to own homes. The Funding Fee is a one time payment which you can pay at closing, or instead add to your loan. Depending on how much you decide to put down on a purchase or how much of the home value you want to ref
These two loan options go head to head for the home buyers who typically have less than 10-20% for a down payment. Both options offer an affordable path to home ownership, and both exist because they fit different applicant criteria. This is a lot of information and can be overwhelming at first! When you’re ready, I can work through both with you and start a strategy for your personal situation and plans. The Basics: A low down payment minimum is required for each. Mortgage insurance is set up differently but it is required with both (if you’re putting less than 20% down). It is not required that you be a first-time home buyer for either. Each has a minimum credit score requirement which also depends on the lender you work with. Both programs require you to occupy the house you purchase using the loan. Key Differences: Mortgage Insurance: FHA is fixed at one rate, no matter what your credit score is, as long as you qualify. FHA mortgage insurance
Comments
Post a Comment