Unless you plan on buying a new house with cash, mortgage loans are a significant part of the home buying process. However, sometimes homebuyers overlook costs outside of the down payment and monthly mortgage payment when planning a homeownership budget.
What are closing costs? What do they include? How much should you budget for these costs? One of the best mortgage companies Texas offers has insights for you here!
What Are Closing Costs?
Closing costs are the processing fees you pay to your mortgage lender when you close on your home loan.
If you're tallying all of the costs and fees associated with buying a home using FHA loans or other types of financing, you're probably wondering what else could be included in "closing" costs. However, before you get the keys to your new house and take ownership, you must sit down with your broker and the real estate agents to close on the home and pay final costs.
Closing costs usually range from 2% to 5% of the price of your mortgage loan amount. For example, if you buy a $100,000 home with 10 percent down ($10,000) and your closing fees equal 2 percent of the purchase price ($4,000), you'll be expected to pay an additional $1,500 out-of-pocket at closing. These costs cannot be rolled into the monthly mortgage payment, and in many cases, you'll need to bring a cashier's check to pay the costs at closing.
How You Save Money On Closing Costs With Texas United Mortgage
What sets apart Texas United Mortgage from most lenders, is that conventional loan borrowers can hold their taxes and insurance money on their own, instead of placing it in escrow. Most lenders will require you to put your homeowners insurance and property taxes in escrow, which means the bank gets to hold your money.
Other lenders also charge extra to pad their account, and then lower your payment later on.
With us, not only can you hold the money and make your payments at your discretion, to taxes and insurance, but you get to choose how you use that money such as placing it in a high yields savings account until you're ready to make the payment.
Other lenders may also charge you a penalty fee for not placing the money in escrow. They'll often build the fee into the mortgage rate, or your loan fees, without your knowledge.
We say: we'll let you choose how you spend your money and when you pay your fees.
What Do Closing Costs Include?
Closing costs vary depending on where you live and what type of mortgage loan you qualify for. Closing costs in Texas include, but are not limited to:
Title insurance fees (for the buyer)
Notary or courier fees (if there's no mortgage company on staff to handle these tasks)
Mortgage rates are subject to change and are not guaranteed. The rates may vary based on credit score, loan amount, and other factors.
Loan amounts greater than $300,000. FICO credit score greater than 740 or higher. Owner Occupied
30 Conventional Year Fixed - $400,000 or greater . LTV 75.0%. 1 % Point Charged.
15 Year Fixed - $400,000 or greater. LTV 95%. 1 Point.
30 Year Jumbo Loan - $800,000 or greater. LTV 75.0%. 1 Point.
30 Year FHA Loan - $250,000. LTV 96.5%. 1 Point
30 Year VA Loan - $350,000. 100.0% 1 Point.
Why Do Buyers Pay Closing Costs?
Shouldn't the seller pay all closing costs to close the sale of their home? Unfortunately, the home buying process doesn't work that way. While sellers usually cover real estate agent commissions (for the buyer and seller agents) and a few other final costs, buyers pay most closing costs to own a new home officially.
If you're a mortgage applicant expecting your mortgage to cover the money for your down payment, closing costs, and other prepaid expenses because you have excellent credit, think again. It's important to work with one of the best mortgage companies Texas offers to find the best financing options and accurately estimate how much you'll need to bring to your closing to cover closing costs.
What Impacts Closing Costs?
The type of mortgage you choose and other factors can impact how much you'll pay in closing costs. For example, mortgage applicants with low credit scores often have to pay mortgage companies in Texas for a more in-depth mortgage underwriting process. This is due to a mortgage lender's risk for issuing a mortgage loan to a mortgage applicant who they believe will default on their mortgage payments. Federal Housing Administration FHA mortgage lenders also charge more closing costs when borrowers put a percent down less than 20 percent of the purchase price.
The right mortgage expert can guide you to the right type of loan, mortgage insurance, down payment amount, and estimate closing costs for your new home. Whether it's a conventional loan, USDA loan, Texas FHA loan, or another option, work with a professional to help you research your options and budget appropriately.
Can You Reduce Closing Costs?
In some cases, buyers can reduce the amount they pay for closing costs—but it takes some work to make that happen. Choose a mortgage company that can help you find the best mortgage rates and lending options to reduce overall costs (including closing costs). The right lender and your real estate agent might also be able to work with the seller to contribute more to the closing costs and offset how much you have to pay.
You can also ask your friendly loan officer at Texas United Mortgage, a Texas mortgage company, for more help.
No matter your final costs at closing, budgeting is critical to make sure you're not caught off guard by surprises on closing day or when your first mortgage payment is due!
Work With the Best Mortgage Companies Texas Offers On Closing Costs
It's hard to know how much you'll need for closing costs when buying a home. The right mortgage company in Texas can help you prepare by estimating potential closing costs and explaining your financing options. If you're ready, we're here to take the next step with you! We hope this blog post has helped you understand a bit more about what to export when planning your budget and estimating the cost of homeownership. Reach out to Texas United Mortgage today if you have any questions or want to learn more about our services! We can talk with you about FHA loan requirements and also answer the question, "how long does it take to close on a house in Texas?"
Learn more about what it costs to be a homeowner! Download a free copy of "The Definitive Home Buying Cost Worksheet.