Our clients will be Educated, Encouraged, & Empowered to a more Self-Reliant Attitude toward Home Loan Financing.
"Our Clients will be Educated, Encouraged, and Empowered
to a more Self-Reliant Attitude toward Home Loan Financing."
DOWN PAYMENT & CLOSING COSTS
Down Payment
If you are a home buyer who has been out shopping for a home, you’ve probably already heard your real estate agent or loan officer’s first question: How much will you be putting down?
As mortgage lending guidelines tighten, the down payment is becoming more and more critical. Mortgage lenders, as well as mortgage insurance companies, are requiring borrowers to make larger financial investments when buying homes. Conventional lenders are looking for middle credit scores in the 680 to 720 range and a 10% to 20% minimum down payment.
FHA loans are becoming more and more popular because they offer competitive interest rates while only requiring a minimum middle credit score of 620 to 640 and just a 3.5% down payment.
The Loan to Value (LTV)
A term that you should become familiar with is "loan to value" or LTV. The LTV will determine the amount of down payment you will be required to pay on your home loan. The LTV is the percentage of the loan amount the lender will finance. (80%-85% ...) The remainder will make-up the down payment.
The borrower’s credit and debt profile in conjunction with the lenders guidelines will determine the amount they are willing to loan. The home buyer(s) will be responsible for paying the remaining balance of the loan within the closing costs.
Down Payment with Gift Letter -FHA
If you are applying for a FHA mortgage, you should receive as part of your loan application package a special form called a “gift letter.” The goal of this letter is to identify the source of the funds and assure the lender that they are in fact a gift. FHA will now allow you to receive a "gift" of as much as 6% of the sales price from a "blood" relative. Additionally, the family member providing the funds must sign a document confirming that the "gift" is not a loan that has to be paid back.
Conventional lenders require that the funds used for closing come directly from the borrowers own finds.
closing costs
As a rule of thumb, closing costs to buy a home run about 3 to 5 percent of the purchase price. Much depends on the points and origination fees a lender charges to make the loan, which are disclosed on the buyer's Good Faith Estimate.
The total closing costs to purchase a $150,000 home could cost anywhere from approximately $4,500 to $7,500 or more. (not including Pre-paid items)
Non-Recurring Closing Costs
Fees that are paid once and never again are called non-recurring. These fees are one-time charges for such items as:
· Origination Fees (Lender fees paid in conjunction with the loan on
the the HUD-1, line 800.)
· Escrow or closing
· Notary
· Wire fees
· Courier / Delivery
· Attorney fees
· Endorsements
· Recording
· State, County or City Transfer Taxes
· Natural Hazard Disclosures
Recurring Closings Costs - The Pre-paids
Recurring fees are those charges that you will pay again and again. They include such fees as:
· Flood Insurance (if required in your area)
· Property Taxes
· Mutual or Private Mortgage Insurance Premiums
The time of the year that you close will dictate how many prorated months of premiums the lender will collect to hold against future payments of taxes and insurance. Not every loan has an “impound” or escrow account, but typically loans totaling more than 80% of your purchase price will require an impound / escrow account.
Can a Seller Credit the Buyer for Closing Costs?
On FHA loans the seller may pay up to 6% of the “non-recurring” closing costs. Conventional lenders will typically allow up to 3%. Always check with your lender before you negotiate an offer that involves a seller credit because the lender might not allow it.
Lenders will not let a borrower receive cash from a seller at closing, regardless of what you may hear at those no-money-down seminars.
Mortgage Assistance Program
Phone:281.674.5897 Fax: 713.634.2839
rlavong@ev1.net
