Category: Buying

If you’re like many first-time home-buyers, you may be totally thrown off guard and confused by the term “closing costs.” Closing costs is a broad term for expenses and fees for products and services incurred during your real estate transaction.

You can estimate closing costs to be approximately one percent to eight percent of the total value of the home you’re purchasing, although average numbers may vary by state. When your home loan is pre-approved, your lender will provide you with a rough estimate of closing costs. Then, three days before the close of sale, you’ll receive a statement of actual costs.

Closing costs are not covered by your home mortgage loan and should be considered an additional out-of-pocket expense. However, in some cases, the buyer can negotiate the terms of the contract so that the seller pays part or all of the closing costs. However, in the case of competing offers, the seller may be inclined to accept the offer of the buyer who didn’t negotiate the responsibility of closing costs. Furthermore, special loan programs may allow you to include closing costs in your loan if you qualify.

Here are a few of the items that may be included in your closing costs at the end of your real estate transaction:

Survey

Survey: When the seller accepts your offer, a surveyor must clearly define the property lines and boundaries.

Inspection

Inspection: An inspector is called in to determine that there are no problems with the condition of the property and its major systems such as heating and air, plumbing, electrical, roofing, and pests like termites.

Appraisal

Appraisal: The appraiser verifies for the bank that the home and property are worth what you’re borrowing in the current real estate market.

Legal

Legal: Some states require lawyers to review real estate contracts.

Administrative

Administrative: The title has to be checked for tax holds or liens. For this, there are administrative fees in addition to filing fees charged by the county or city.

Courier

Courier: Many of the documents, forms, and reports involved in real estate transactions need to be transferred physically from one location to another.

Escrow Agent

Escrow Agent: The escrow agent is the third-party agent who manages funds from the lender and disburses money appropriately to service providers, etc.

Lender

Lender: The representative from the lending institution who helped you apply for your home loan receives payment for his or her services.

Credit Reporting

Credit Reporting: When the lender processed your application, he or she also had to order copies of your credit report. The fee for obtaining the report is also included in your closing costs.

Underwriting fees

Underwriting fees: Although the lending agent helped you apply for your home mortgage loan, the processing of the paperwork to approve the loan is conducted and charged for separately.

Interest

Interest: In some situations, the lender requires the advance payment of interest incurred between the time of close and when the first mortgage payment is due.

Insurance and Taxes

Insurance and Taxes: Not always, but in some cases the bank also requires a two-month pre-payment for property taxes and homeowners insurance.

Wire Transfer Fees

Wire Transfer Fees accumulated when money is transferred between accounts.

Real Estate Agents

Real Estate Agents: Real estate agents work under brokerages, who also charge a fee that encompasses the real estate agent commissions.

Even though you may have spent years saving for the investment of your first house, you’re going to need more than a twenty percent down payment and earnest money deposit to purchase a home. When you determine your home-buying budget and the amount of up-front, out-of-pocket funds you’ll need, don’t forget to figure in the closing costs.

Talk with your lender and with your real estate agent to gain a deeper understanding of what closing costs are, as well as how and when they are to be paid.

Many first-time home-buyers have no idea of what closing costs are, who is responsible for them, and how they’re paid. It’s those same buyers who may face disappointment when they realize they’re not as prepared as they thought they were to buy their first house. By knowing ahead of time what to expect in terms of closing costs, you’ll be better prepared and not caught off guard when you’re asked to pay more than what you’d originally anticipated.

Your real estate agent is the best source of information about the local community and real estate topics. Give Tory Castillo a call today at 925-718-6658 to learn more about local areas, discuss selling a house, or tour available homes for sale.

The season has come for you to start thinking about buying your first house. Although tempting, try to avoid the instant gratification of browsing for homes online. Before you begin the house-hunt, there are things you need to know to prepare for your home buying journey. Here are six steps to buying a house.

Money Matters

Your first step is to get your financial affairs in order. Getting your financial ducks in a row means polishing your credit score to perfection, saving enough for your twenty-percent down payment, cash for an earnest money deposit, and funds to cover closing costs and other expenses. During this phase, avoid making any major purchases like new cars or expensive furniture. With the money saved for the move and your credit report ready for review, it’s time to move to step two.

Pre-Approval

Your second step into home ownership involves pre-approval for your home mortgage loan. Pre-approval, contrary to common belief, is best obtained before you begin shopping for your dream house. Pre-approval can help set your budget, send a signal to real estate agents that you’re a qualified buyer, and can prove to sellers that you’re a serious contender for purchasing a home. This process can take time, so not having pre-approval could cause sellers to accept offers from buyers who are pre-approved and ready to move.

Finding the Best Real Estate Agent

Step three is to locate the ideal real estate agent. Not all agents carry the same certifications, specifications, qualifications, or experience. Find an agent who is familiar with the areas in which you’d like to live, and in the types of property, you’re aiming to buy. Interview agents, ask pertinent questions, read their reviews and ratings, and make sure you get along with the agent you think is best. As important as qualifications is personality; you’ve got to like the person with whom you work toward accomplishing your dreams.

House Shopping, Offers, and Negotiations

Step four is the fun part. Now you can start house shopping. Your real estate agent will help you refine your wish list to fit your realistic budget. He or she will then show you properties matching your criteria and will help you draft and submit your offer, as well as assist with negotiations.

Inspections, Surveys, Appraisals

Step five can be frustrating. This step is the waiting period – the ‘tween time from when the seller said yes and when you get your keys. The wait is due to the need for surveys, appraisals, inspections, and legalities such as a title check. The survey is to define the property lines. The inspection is to certify the condition of the structure, and the appraiser determines the current market value of the property you’re buying. Not only do these processes satisfy the bank that the real estate you’re purchasing is equal to or greater than the amount you’re borrowing, but it also protects your interests as well.

Close of Sale

Step six is probably the most exciting part of the entire ordeal. The documents have all been submitted and signed; the title has been deemed free and clear of liens or holds; the house has been cleared of problems, and you’ve reached the closing date.

If the seller has worked out details with his real estate agent, he or she won’t need to be present at the closing meeting. At this meeting, the escrow officer managing the loan funds and administrative processes dispenses out the dough to the appropriate service providers. The title is then transferred from seller to buyer, and you receive the keys to your new house.

By this time, the seller has vacated the premises and has left the house in as good of shape or better than when you saw it last.

When you’re not adequately prepared and don’t know what to expect, the home-buying experience can be more of a frightening nightmare than a dream come true. However, when you educate yourself about the processes, prepare in advance for each step along the way, and exercise patience while the transaction moves along, then you’re armed with information and ready to pursue your piece of the American dream of home ownership.

Your real estate agent is the best source of information about the local community and real estate topics. Give Tory Castillo a call today at 925-718-6658 to learn more about local areas, discuss selling a house, or tour available homes for sale.