Am I ready to buy a house with the Amount of money I have?
It has been observed that most of the home buyers focus on the down payment when it is about buying a house. Closing expenses can steadily increase the cash amount you require to close. A question arises – Am I ready to buy a house and what are the fees I need to pay?
One gets surprised often when buying a home and that he or she requires more cash to close on a house than just a mere down payment. It is difficult to save for the down payment on your home and discover that you require more to finish the transaction.
So how much cash does one require to purchase a home. Norita Investors will suggest you ample ways that can lessen or even reduce the extra cash requirements.
The home buying process constitutes of this cash outlay, and it is important for the cash buyers. It is the percentage of the buying price of the property.
In case the buying price is $300,000 and you need to make a down payment, you need to pay $30,000.
How much is required for a down payment on a house?
It differs. In case you wish to avoid paying extra private mortgage insurance, you are looking for thirty percent down payment.
However, the first-time buyers may find it cumbersome with 30 percent. So, mortgage lenders have options with down payments of 10 percent, 5 percent etc.
Appropriate funding sources for a down payment
It depends on the mortgage types that you are applying for. The down payment may come from your own funds like your bank account. It might come from a gift.
Jumbo loans and other traditional loans have stringent rules when it is about the source of your down payment funds. The lender would wish to see that the funds come from your own financial resources in case you make a down payment of five percent of the buying price.
That can be funds that are borrowed from a retirement plan that’s employer sponsored or the sale of an individual asset.
In case you make a ten percent down payment, the lender may need five percent coming from your own funds. It can be five percent from a gift from a relative. The lender won’t need you to show proof of funds from you if the gift is 20 percent of the property’s buying price.
Where do I get down payment funds from?
There are two sources’ cash and unsecured loans. The currency you store in a safe at home, that’s cash. Any amount of cash you invest into a home needs to pass through a financial institution to be considered legit fund’s source.
Any other idea that is paying the down payment with the help of a credit card advance will not be entertained by the lender. This would create an extra obligation for debt.
This is where things begin to get somewhat complex. This can be because the cash outlay to do the purchase can be higher than the down payment.
Closing expenses vary: The closing costs may differ from one state to another. This is because of government taxes on the basis on a percentage of your mortgage loan amount. They may differ on the basis on different rates charged for attorneys, appraisals etc.
Closing expenses may differ from one lender to another: Each lender charges a varied application fee. Lenders charge points as they represent a percentage point of the loan amount.
Typical closing expenses
Following is a list of some common closing expenses including their range of expenses.
Application fee: All the lenders do not charge this fee. When they do charge, it includes funds for appraisal fee and the credit report. It would be between $300 and $500.
Appraisal fee: This fee would be paid by the lender to an independent appraiser to develop the market value you are buying. It would be between $300 and $500, and this relies on the appraiser fees in your market area.
Title search – This is a search done by a title firm to ascertain if any liens are existing against the property. It is to make sure the property will transfer with a clear title. The cost of the search is between $200 and $300.
Title insurance – This insurance is bought to cover any liens that might not arise during the title search. One must have the lender’s title insurance for protection of the lender against any liens that have not been found.
It is highly recommended that you get owner’s title insurance too which will protect you in case some liens are found.
You will be able to refinance your home or sell the property in case a prior lien is found out. The lender’s title insurance expenses are several hundred dollars. It is based on your home’s value. The title of the owner is $300.
Fees of the attorney – The real estate closing are taken care by various title firms. They are handled by attorneys. You might have to pay between $300 to $900 or more and that depends on your transaction’s complex nature or your geographic location.
Home inspection – An appraisal does not tell about the loopholes with the property. A home inspection is thus advised when you have plans to buy a home. The cost will be between $300 to $400. It may be money spent well if it is about costly issues.
Mortgage taxes and real estate transfer – There are many states which impose taxes based on the value of property transferred or the mortgage amount. It can be both property’s value and mortgage. This will differ by state and county.
Let’s tell you about two great options that may lessen or reduce closing expenses:
You must negotiate for the seller to pay your closing costs – This will be allowed in areas where this is a usual practice.
Always come to terms with your lenders regarding premium pricing – This is where you must pay a higher interest rate on your mortgage in exchange for the lender paying the closing expenses.
Both can be a nice option in case you make a down payment like five percent and add closing costs on top. It will make your cash outlay much high.
Adjustments in Utility
These may have large number of charges. They can be some hundred dollars. They exhibit the expenses paid by the property seller in advance.
Where can mortgage financing be procured to purchase your home?
Norita Investors – A nice place to begin your search will be Norita Investors. Prior to begin shopping for a new home, you might as well try to find out how much mortgage you can afford and get preapproved for that specific amount.
If you possess a preapproval letter, it will assist you to gain the confidence of your real estate agent or any homebuyers. This is so because they would see how you got a loan for the purchase amount. Norita Investors will facilitate you with a fast preliminary application and you may get quotes from several lenders.
This can make you do the rates comparisons to ensure you get the finest interest rates and mortgage terms. If you like the offers, you can move to a more extensive application.
It is pivotal to include extra cash requirements in your home buying plans.