Understanding Closing Costs For Home Buyers
Understanding Closing Costs:
Closing costs and down payments are two types of costs a home buyer needs to come up with on a home purchase loan. Homeowners who refinance their mortgages also needs to come up with closing costs. Closing costs are costs associated with the purchase or refinance mortgage of a home loan. Someone needs to pay the closing costs. Closing costs can be paid by the home buyer, the homeowner doing the refinance on the home, the mortgage lender, the seller on a home purchase via sellers concession or a combination of all. Understanding closing costs is important for both home buyers and mortgage refinance borrowers.
Understanding Closing Costs: Closing Costs Paid By Lender
Refinance mortgage loans which the closing costs is paid by the mortgage lender is commonly referred to as zero closing cost mortgage lenders. In fact the term no closing costs is deceiving because there are no such thing as free in this world. No closing costs refinance mortgage loans is when the mortgage loan borrower does not have to come up with paying for closing costs. The mortgage lender will cover the closing costs in lieu of a higher mortgage rate the mortgage lender charges the borrower. Mortgage lenders will normally charge a 0.25% mortgage rate premium in lieu of covering the mortgage loan borrower’s closing costs.
Understanding Closing Costs: Types Of Closing Costs
There are two categories of closing costs. The first type of closing costs are the mortgage lender closing costs. The second type of closing costs are the third party closing costs. Both of these closings costs are part of a home purchase mortgage loan and refinance mortgage loan.
Understanding Closing Costs: Lender Charges
Closing costs that a mortgage lender charges are costs and fees such as mortgage loan origination fees and discount points for lower rates. There are also mortgage lender fees such as underwriting fees, processing fees, credit report fees, and document prep costs. Mortgage lender costs and fees are disclosed in the Good Faith Estimate on line item SECTION 800.
Understanding Closing Costs: Third Party Charges
The second category of closing costs are third party charges. Third party closing costs are fees and costs that the mortgage lender has nothing to do with such as title charges, attorneys fees, transfer taxes, intangible county taxes, recording fees, and other third party charges associated with the home purchase or refinance mortgage. Clsoing costs vary on the county the property is located and the type of property.
Sellers Concession Towards Buyers Closing Costs
It is always recommended that a home buyer try to get a sellers concession towards a buyer’s closing costs. With a sellers concession, a home buyer can cover all of their closing costs. However, you can not have excess sellers concession. If you have extra sellers concession, then the excess will need to go back to the seller. A home seller cannot give the extra sellers concession to the home buyer in the form of cash or credit. A home buyer needs to use all of the sellers concession he or she receives. Sellers concessions can be used for discount points. Discount points are fees mortgage lenders charge for mortgage loan borrowers buying down their mortgage rates. In the event there is excess sellers concessions, most mortgage lenders will advise the mortgage loan borrower to buy down the mortgage rate.
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