A Guide of estimating closing costs!

Calculating Closing Costs

calculator to calculate home closing costs for homebuyers

In the sale, the sellers usually pay the larger figure of closing costs because they are charged with paying out the commission to the real estate agents. But buyers can try to negotiate with the seller for the seller to pay a portion of the closing costs on behalf of the buyer. We’ll assume for the point of this article that the seller is not paying anything for the buyer.

First, there are several variables that go into the closing cost calculation including the cost of your new home. A good estimate for buyer’s closing costs are around 3-6% of the purchase price. According to Bankrate.com, closing costs increased 6% from 2014-2015 but only 1.6% from 2015 to 2016, which is some consolation. Still, the average across the US on a 200,000 home is around $3,000.

But what goes into closing costs for the buyer?

Components of Closing Costs

The following are some of the costs you can expect to pay at closing:

Ways to Reduce Closing Fees

While there are some services that can be shopped around like title insurance and home inspections, there are also a few other tips to help you pay the least amount possible at closing.

calculator with fees and magnifying glass closing costs for home buyers

  • Close at the end of the month: you’ll be charged per diem interest so if you close at the beginning of the month, you’ll have a larger portion to pay than if you close with one day left.
  • Check with your employer and memberships. Some employers like the military (U.S. government) and some unions offer discounts on closing costs or home prices, though they may require a specific lender be used.
  • Ask the seller to cover them. You can negotiate with the seller to pay your closing costs. However, this is probably not advisable in a hot real estate market.

The State Matters

Closing costs do vary by state due to local and statewide regulations and fees. Here’s a list of the least expensive and most expensive states in which to close.

When you first obtain your loan, you will receive an estimated closing statement. Three business days before closing, you’ll receive a revised one. Compare the two numbers. They may be off slightly but should be very close. If not, notify the sender immediately.

At Bay National Title, we put our clients first. We take the time to make sure all of their questions are answered to their satisfaction.

#millenniumsales buyers home waterfront, oceanfront Berta Correa, Broker 954-802-2143

FHA Loan Requirements: What Home Buyers Need to Qualify

If you’re looking up “FHA loan requirements,” you are very likely wondering if you qualify for an FHA loan. These mortgages, which are insured by the Federal Housing Administration, help home buyers secure financing to buy a home despite their low income, lack of savings, or poor credit scores—the kind of things that often prevent people from getting a conventional loan.

“FHA loans are a great option for a lot of home buyers, particularly if they’re buying their first home,” says Todd Sheinin, mortgage lender and chief operating officer at New America Financial in Gaithersburg, MD. And while not all lenders offer FHA loans, many do, because their government backing guarantees that lenders won’t lose their money if the buyer defaults. So it’s win-win all round!

Yet although FHA loans have looser qualification requirements than traditional mortgages, that doesn’t mean they have none at all. While the exact rules and thresholds will vary a bit by lender, here’s a ballpark guide to what you can expect you’ll need to qualify for an FHA loan.

1. A minimum down payment of 3.5%

With conventional loans, it’s generally recommended that you make a 20% down payment, which would amount to a whopping $50,000 on a $250,000 home. FHA loans lower the bar to a far more realistic level, requiring as little as 3.5%. So, on a $250,000 house, you would only need to plunk down $8,750 to qualify for an FHA loan.

This is a boon, particularly for first-time home buyers, who tend to have less money socked away to put toward their dream of home ownership. In fact, a recent study from Apartment List found that more than two-thirds of millennials don’t even have $1,000 saved up for a down payment. And millennials are now the largest group of home buyers.

2. A minimum credit score of 500

To qualify for an FHA loan, your credit score—the numerical representation of your track record paying past debts—will need to be at least 500—although if your score is indeed in this low range, you’ll have to make a slightly larger down payment, of 10%. To take advantage of that teeny weeny 3.5% down, you’ll need a credit score that’s slightly higher, at 580 or above. All that said, keep in mind that credit requirements may fluctuate not only by lender but based on changes in the housing market.

3. You’ll have to pay mortgage insurance

Because the federal government insures these loans, borrowers must pay an upfront mortgage insurance premium (MIP). Currently, the fee is 1.75%—that’s $4,375 on a $250,000 home loan. However, once you’ve accrued 20% equity in the home, the MIP should drop off from your mortgage payments. (Note: You’ll want to follow up with your lender at that point, to make sure the insurance premium has been removed.)

Borrowers will also have to pay annual mortgage insurance, currently around 0.85% of the borrowed loan amount—or $2,125 more per year. For most loans, this mortgage insurance remains throughout the life of the loan, or until you refinance out of an FHA loan to get rid of it, says Jordan Dobbs, a loan officer at Washington First Mortgage in Rockville, MD.

4. A maximum debt-to-income ratio of 59%

Debt-to-income ratio is a way lenders determine whether you can afford your housing payments, by comparing the amount of money you make to what you owe. Currently, the maximum debt-to-income ratio for an FHA loan is 31%. In other words, if your monthly pretax salary is $6,000, your housing expenses should not exceed about a third of your income, or $1,860.

More realistically, however, debt-to-income ratio should factor in all of your recurring debts, including college and car loans. In this context, the FHA generally looks for a borrower’s total debt load not to exceed 59% of pretax income. To use the $6,000 example above, that would mean that the maximum amount you should be paying for your mortgage and other debts (credit card not included) is $2,580. Check this FHA handbook for more information.

5. The home must undergo a rigorous appraisal

While pretty much all loans require a home appraisal, so lenders can make sure their money isn’t funding a shack, FHA appraisal guidelines are more rigid than those for conventional loans, and not all houses will get the green light for FHA approval. This may mean that the seller of your desired home will need to make some repairs in order for your lender to approve the loan.

What are the FHA loan limits?

FHA loan programs only insure loans up to the maximum limit, which varies by county. In most areas, the limit is $417,000, but in certain high-cost areas, the limit is $636,150. You can see the FHA loan limits for your county at Hud.gov.

For more smart financial news and advice, head over to MarketWatch.

Daniel Bortz is a Realtor in Maryland, Virginia, and Washington, DC, who has written for Money magazine, Entrepreneur magazine, CNNMoney, and more.
First home buyers, Millenniumsales, FHA, morgages, qualify for a mortgage, financial news.

Buying a House With Cash? Don’t Forget These Added Expenses

There’s no question that buying a house with cash will make you feel like a million bucks. Maybe you came into a large inheritance, or you’re just really good at saving. Either way, paying the price of the home in full means you won’t have to worry about making mortgage payments. Plus, sellers love a cash offer because it means they won’t have to wait for mortgage lenders to approve your funding. High-fives all around!

You will, however, still be responsible for other costs that come with buying and owning a house. Don’t forget about these expenses you’ll have to cover, even if you plan on financing the house with cold, hard cash.

  • Real estate transfer taxes charged by the county and/or city
  • Title insurance fee
  • Processing and filing fees for forms being submitted to the County Recorder
  • Appraisal fee
  • Home inspection fee

Even if you’re buying a home with cash, the one-time closing costs, or fees you’ll have to pay during the closing process, can be as much as 3% of the purchase price, according to KW &MSI.

Sadly, your home doesn’t just cost “nothing” in subsequent years. Here are some ongoing costs you should be prepared for—by keeping some money in the kitty.

Closing costs

The purchase price is the biggest number you’ll have to face when buying a house, but there are still closing costs that must be dealt with, says Realtor® Denise Shur with 1:1 Realty in San Jose, CA. Sure, you

Sadly, your home doesn’t just cost “nothing” in subsequent years. Here are some ongoing costs you should be prepared for—by keeping some money in the kitty.

Property taxes

Yep, they say the only things certain in life are death and you-know-what. And it’s true! Even if your entire house is paid off, you’ll still have to pay property taxes each month.

To get an idea of what those bills will look like, check a home’s listing on realtor.com®. Scroll down to the Payment Calculator section, and look on the line that says Property Tax.

To get a more definitive picture, visit your city and county websites to find out the local property tax rates and whether a hike is imminent. You can also check with your real estate agent to get a copy of the current owner’s tax bill.

Homeowners insurance

The cost of the policy will depend on the size and value of your home, your location, your deductible, and your coverage. Talk to your current insurer about the home and area you’ll be moving to to get an accurate picture of your new insurance costs. You might need to add flood or earthquake coverage to your policy if those are real threats in your new neighborhood.

Home maintenance

We hate to break it to you, but things break. That’s why savvy homeowners put aside some money each month for unexpected repair or maintenance needs. Shur recommends considering a home warranty, which costs about $450 a year and provides coverage on a wide variety of elements such as plumbing, electrical, heating/air conditioning, and appliances.

Homeowners association fees

If you’re buying in a community with a homeowners association, you might have to budget for monthly or annual HOA fees. These mandatory fees are paid by everyone who owns in the community and go toward maintaining the common areas.

These fees will be based on the size of your home and the amenities in your community, but for a typical single-family home, HOA fees can cost around $200 to $300 a month.

Utilities

Don’t forget to factor in utilities such as electric, gas, water, sewer, and trash. To get a clear picture of what you’ll be required to pay, ask your real estate agent to ask the sellers what a year’s worth of bills costs. Utilities can fluctuate from season to season, so this is especially important if you’re moving across the country to a new climate.

Deirdre Woollard contributed to this article. 

Buy or sell first? Chicken or egg?

Selling a home is stressful. Buying a home is stressful. Doing both? There should be a new word for that.

But somehow people do it, every day in every part of the country and in every market condition imaginable. So you can do this. And knowing what you’re in for and how to coordinate the sale and purchase aspects will make it more manageable.

Selling a home is stressful. Buying a home is stressful. Doing both? There should be a new word for that.

But somehow people do it, every day in every part of the country and in every market condition imaginable. So you can do this. And knowing what you’re in for and how to coordinate the sale and purchase aspects will make it more manageable.

Buy or sell first? Chicken or egg?

Like the proverbial poultry conundrum, there is no easy answer to which comes first, the buying or the selling. Whichever comes first will put additional pressure on the other side of the equation. But there is an order that will make sense for you. The first step is to take a good look at your finances, your willingness to move twice and the market conditions where you are buying and selling. Let’s look at three scenarios: Sell first, buy first or turn your existing home into a rental.

Sell first

Pros:
• You’ll have cash for a down payment
• No risk of having to juggle two mortgages at once
• No pressure to lower the price to sell quickly

Cons:
• May need to move twice
• Takes your investment out of the real estate market
• Puts pressure on you to find a new house quickly

If you’re like most of us, you don’t have cash to make a down payment on your new house and enough income to make two mortgage payments indefinitely. So it may seem like selling first is the smart, if not only, choice. But selling first leads to one major question: Where will you live in the time between selling and buying?

Gap housing

If you sell your home before you buy a new one you will almost certainly have a gap of time, whether it’s days or months, between needing to be out of the old house and when you can take possession of your new one. Do you mind moving twice, first into a rental or in with extremely hospitable friends or family? Can you find a rental that offers month-to-month leasing?

Even if you plan to sell first, it makes sense to start shopping for your new home right away. If you find one you want, you can be ready to make an offer as soon as your home sells. If nothing else, it gives you a head start and something to do while you’re vacating your home for showings.

It might seem less stressful to sell your home, rent an apartment and give yourself some time to take a breath and look around. But first look at the housing market. In a rising market, time is money. Once you’ve sold your home, you’re out of that market and the longer you wait to get back in, the more it will rise without you. Watching the value of the home you sold soar, along with the prices of potential new homes while you sit out a six-month lease is no fun. If you’re in a slow, or “buyers’ market,” you can probably afford to sit out for a while. But don’t wait too long or the market may turn around on you.

Rent-back

Wouldn’t it be nice if you could sell your house but stay in it until you buy a new one? You can, with the right sales contract. It’s called a rent-back provision. Essentially, when you sell your house you negotiate a deal to become a tenant for a period of time until you can buy and move into a new house. You’ll pay at least enough to cover their mortgage payment but you can stay put until your new home is ready, which can be priceless. There’s a hitch, of course. If you sell with a rent-back requirement, you’ll likely get fewer offers. You’ll also have a relatively short window of time to find a new home because buyers probably won’t want to wait for months to get into their new home.

Buy first

Pros:
• Only have to move once
• No pressure to pick a house that may not be exactly what you want

Cons:
• Pressure to sell quickly
• Financing can be hard to find – and expensive

If you want to be assured of moving directly into your new home without a pit stop as a renter, you’ll have to buy first. But unless you’re sitting on piles of cash that may seem impossible. It’s not. There are a couple of ways to make this work.

Contingency offer

The first and probably most appealing option from your standpoint is to make a “contingent” offer on your new home. What that means is that you enter into a contract to buy the new home when and if you sell your current one. (The contract will include an expiration date, so it’s not like you can promise to buy your new place and then lollygag about selling your old one.) But nothing in life is as easy as that, so of course there’s a downside. In a seller’s market, a contingent offer probably won’t be considered too seriously.

Sellers are already stressed about selling their own home, now you’re asking them to stress about you selling yours as well. A contingent offer also eats up most if not all of your negotiating room. So unless the house is seriously overpriced, the asking price will be the floor, not the ceiling of your offer. Talk to your agent about whether a contingent offer makes sense given local market conditions.

Borrow what you need

If the conditions aren’t right for a contingent offer, all is not lost. You may not have cash to make a down payment and keep up two mortgages. But you do have an asset that you didn’t have when you were a first-time homebuyer: Your home.

Assuming you’ve got some equity built up, you can use it to finance your next move. You may have heard about bridge loans. These are short-term loans to help “bridge” the gap between selling and buying. You can either get a bridge loan to completely pay off your existing mortgage and provide a down payment on your new home or you can get one that just provides a down payment. But beware. These are considered high-risk loans, so they come with a higher interest rate than a typical mortgage loan. They’re also trickier to get than they were a few years ago.

Today more people use a HELOC or Home Equity Line of Credit to finance a purchase before a sale. Essentially, it allows you to borrow against the equity in your home. You can draw money out as you need it to make your down payment and cover the extra mortgage. Like a bridge loan, it’s a short-term solution. (And lenders probably won’t offer you a HELOC if your existing home is already on the market.)

Even if borrowing gives you some breathing room, there is no way around it. If you buy first, you’re going to be under more pressure to sell your existing home.

Become a landlord

Pros:
• Skip the stress of selling
• Add to your real estate portfolio

Cons:
• Don’t get cash out to make down payment
• Stress of being a landlord/finding tenants
• Potential tax consequences

If you can cobble together a down payment without selling your house, either through a HELOC or stellar saving habits, you might want to forgo selling altogether and rent out your existing home. If you can get enough rent to cover mortgage and maintenance costs, it could be a good investment. However, there are tax implications as well as stress implications. So check with a tax adviser about your particular circumstances before committing to this option.

Bottom line: It depends

There are options and which one works for you probably depends upon market conditions. In a buyer’s market, you have more leverage on the buying-side of the deal so you may be able to make an offer to purchase contingent on the sale of your home. In a seller’s market, you may be better able to negotiate a rent-back of your current home. And in either case, invest in some stress balls or a gym membership to get you through.

Like the proverbial poultry conundrum, there is no easy answer to which comes first, the buying or the selling. Whichever comes first will put additional pressure on the other side of the equation. But there is an order that will make sense for you. The first step is to take a good look at your finances, your willingness to move twice and the market conditions where you are buying and selling. Let’s look at three scenarios: Sell first, buy first or turn your existing home into a rental.

Sell first

Pros:
• You’ll have cash for a down payment
• No risk of having to juggle two mortgages at once
• No pressure to lower the price to sell quickly

Cons:
• May need to move twice
• Takes your investment out of the real estate market
• Puts pressure on you to find a new house quickly

If you’re like most of us, you don’t have cash to make a down payment on your new house and enough income to make two mortgage payments indefinitely. So it may seem like selling first is the smart, if not only, choice. But selling first leads to one major question: Where will you live in the time between selling and buying?

Gap housing

If you sell your home before you buy a new one you will almost certainly have a gap of time, whether it’s days or months, between needing to be out of the old house and when you can take possession of your new one. Do you mind moving twice, first into a rental or in with extremely hospitable friends or family? Can you find a rental that offers month-to-month leasing?

Even if you plan to sell first, it makes sense to start shopping for your new home right away. If you find one you want, you can be ready to make an offer as soon as your home sells. If nothing else, it gives you a head start and something to do while you’re vacating your home for showings.

It might seem less stressful to sell your home, rent an apartment and give yourself some time to take a breath and look around. But first look at the housing market. In a rising market, time is money. Once you’ve sold your home, you’re out of that market and the longer you wait to get back in, the more it will rise without you. Watching the value of the home you sold soar, along with the prices of potential new homes while you sit out a six-month lease is no fun. If you’re in a slow, or “buyers’ market,” you can probably afford to sit out for a while. But don’t wait too long or the market may turn around on you.

Rent-back

Wouldn’t it be nice if you could sell your house but stay in it until you buy a new one? You can, with the right sales contract. It’s called a rent-back provision. Essentially, when you sell your house you negotiate a deal to become a tenant for a period of time until you can buy and move into a new house. You’ll pay at least enough to cover their mortgage payment but you can stay put until your new home is ready, which can be priceless. There’s a hitch, of course. If you sell with a rent-back requirement, you’ll likely get fewer offers. You’ll also have a relatively short window of time to find a new home because buyers probably won’t want to wait for months to get into their new home.

Buy first

Pros:
• Only have to move once
• No pressure to pick a house that may not be exactly what you want

Cons:
• Pressure to sell quickly
• Financing can be hard to find – and expensive

If you want to be assured of moving directly into your new home without a pit stop as a renter, you’ll have to buy first. But unless you’re sitting on piles of cash that may seem impossible. It’s not. There are a couple of ways to make this work.

Contingency offer

The first and probably most appealing option from your standpoint is to make a “contingent” offer on your new home. What that means is that you enter into a contract to buy the new home when and if you sell your current one. (The contract will include an expiration date, so it’s not like you can promise to buy your new place and then lollygag about selling your old one.) But nothing in life is as easy as that, so of course there’s a downside. In a seller’s market, a contingent offer probably won’t be considered too seriously.

Sellers are already stressed about selling their own home, now you’re asking them to stress about you selling yours as well. A contingent offer also eats up most if not all of your negotiating room. So unless the house is seriously overpriced, the asking price will be the floor, not the ceiling of your offer. Talk to your agent about whether a contingent offer makes sense given local market conditions.

Borrow what you need

If the conditions aren’t right for a contingent offer, all is not lost. You may not have cash to make a down payment and keep up two mortgages. But you do have an asset that you didn’t have when you were a first-time homebuyer: Your home.

Assuming you’ve got some equity built up, you can use it to finance your next move. You may have heard about bridge loans. These are short-term loans to help “bridge” the gap between selling and buying. You can either get a bridge loan to completely pay off your existing mortgage and provide a down payment on your new home or you can get one that just provides a down payment. But beware. These are considered high-risk loans, so they come with a higher interest rate than a typical mortgage loan. They’re also trickier to get than they were a few years ago.

Today more people use a HELOC or Home Equity Line of Credit to finance a purchase before a sale. Essentially, it allows you to borrow against the equity in your home. You can draw money out as you need it to make your down payment and cover the extra mortgage. Like a bridge loan, it’s a short-term solution. (And lenders probably won’t offer you a HELOC if your existing home is already on the market.)

Even if borrowing gives you some breathing room, there is no way around it. If you buy first, you’re going to be under more pressure to sell your existing home.

Become a landlord

Pros:
• Skip the stress of selling
• Add to your real estate portfolio

Cons:
• Don’t get cash out to make down payment
• Stress of being a landlord/finding tenants
• Potential tax consequences

If you can cobble together a down payment without selling your house, either through a HELOC or stellar saving habits, you might want to forgo selling altogether and rent out your existing home. If you can get enough rent to cover mortgage and maintenance costs, it could be a good investment. However, there are tax implications as well as stress implications. So check with a tax adviser about your particular circumstances before committing to this option.

Bottom line: It depends

There are options and which one works for you probably depends upon market conditions. In a buyer’s market, you have more leverage on the buying-side of the deal so you may be able to make an offer to purchase contingent on the sale of your home. In a seller’s market, you may be better able to negotiate a rent-back of your current home. And in either case, invest in some stress balls or a gym membership to get you through.

#millenniumsales #selling #waterhomeproperties #byowner