What are the Closing Costs for a Home Loan?

Posted on September 15, 2015 · Posted in Connecticut Mortgage Company

Closing Costs and Fees for a Connecticut Mortgage

 

This article is an overview of the majority of costs that are attributed to a home purchase or home refinance.  I will cover two areas: Buying a Home in Connecticut and Refinancing your Home in Connecticut.

When you buy a home many consumers assume they can roll their closing costs into their loan.  This is not always the case.  Even with a seller concession to pay closing costs and a lender credit (which is when the lender gives you a yield spread credit) you will still most likely need to pay for some of your closing costs.  It is for this reason that it is good to know what all of the costs are:

1. Up-Front Deposit.  In many cases with a purchase and sales agreement you will need to give an upfront deposit to prove your commitment to buying a home.  In most cases it is $1,000.00 at the signing of the contract and $4,000.00 within a few days of the signing the contract.  This really depends on the purchase price.  If you are buying a more expensive home you will most likely pay more of an upfront deposit and then pay less for smaller purchase prices.

2. Home Owner’s Insurance.  When buying a home you will have to pay 1 full year of your home owner’s insurance in advance to your insurance company.  How much this amount is depends on your deductible and loan size/property value.

3. Escrows.  Most lenders require that you pay your taxes and home-owner’s insurance with your mortgage payments.  So at closing you will need to set up an escrow account usually of 2-3 months of insurance payments (even-though you just paid a year in advance) and 6 months or so of your monthly property tax payments (to figure this out just take what your total annual taxes are and divide by 12 to get your monthly payment amount).  The amount of taxes you pay forward for your escrow varies from property to property.  It is important to remember that this escrow account is in fact your money and not a fee that you are paying the mortgage company.

4. Odd Days Interest.  This fee that you pay at closing really comes down to what day you close in the month.  If you close at the end of the month it is much less and if you pay in the beginning of the month it is more.  Essentially this the fee you pay for in-between the time you close and when your first payment is due.

5. Seller’s Fees.  These fees will depend on your property type and what is negotiated in your purchase and sales agreement.  If the seller has pre-paid property taxes and/or oil in the tank for the winter – usually the cost of this gets paid back to the seller from the buyer.

6. Legal Fees.  Generally most attorneys charge a similar amount based on your loan size and purchase price.  Whether you use an attorney or a notary for your closing you will still have to pay for a Title Search, Title Insurance, Recording of the New Title, any State/Government Fees, Tracking Fee, and for a person to physically do the closing for you.  Your title insurance is based on your loan size – so it is best to consult with an attorney ahead of time in order to find out with the costs of closing your loan will be.

7. Inspection.  An inspection is not required on every mortgage you do but is usually required if you are doing a FHA, VA, or USDA loan.  Either way it is always a wise decision to have an inspection done so you know if there are any issues with the house.  The cost of the inspection is based on the square footage of your property and usually costs on average around $450.00.  This is a fee paid directly to the inspector at the time of the inspection.

8. Appraisal.  This is a fee required by the lender and paid by the borrower to let the lender know that their is collateral for the loan.  Again this fee can vary depending on the size of the home (the bigger the home usually means the higher the cost) and multi-family homes cost more than single family homes.  On average a single family home appraisal in Connecticut costs $450.00

9. Mortgage Fees.  You should always consult with your loan officer and get a Good-Faith-Estimate to go over these fees.  On average you will pay a lender/Processing Fee between $650-$850, Discount Points (this is not required and only done to buy down the rate, but consult your loan officer in that this is not usually a wise economic decision if you are going to be in the loan for a short period of time), and lender Points (some lenders, as a practice will charge you a percentage of your loan upfront as a profit margin, at Northeast Financial – as a practice we do not).  All of these fees are due at closing and that is why it is important ahead of time to negotiate a seller’s concession and know about any lender credits and if they are going to be needed for your closing.

It is also important to remember that even if you have all of your fees ahead of a time in a bank account (Lender’s like to see them seasoned there for a minimum of 2 months) – many lenders will still require you have reserves on average of 3 months of mortgage payments in excess.  Consult your loan officer so that they can inform you of how much will be needed.

Refinancing a property is very similar to that of a Home Purchase with some exceptions.  The first is that you will not be doing an inspection of your property or paying and Seller’s Fees (which saves you money on the closing).  The second difference is that on a refinance you can roll your closing costs into your loan.  A third difference is that an attorney may be able to get you a discounted Title Insurance Policy if your previous policy is not that old (which can save you a lot).  Finally, you may have Zero closing costs if you streamline your loan (No Appraisal  or Fees that you pay – but this can only be done with a FHA, VA, or USDA Mortgage).

I would truly like the opportunity to talk with you about your options and take your through step by step of the process.  Please call the office and ask for me, Mike Meyer.

 

Thanks,

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Michael Meyer
Senior Vice President of Northeast Financial
NMLS#117875
Mike@northeast-mortgage.com
860-876-0572
210 S. Main St Middletown, CT 06457

NMLS#117273 

 

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