What Are Home Buyers Paying For In Mortgage Fees and Closing Costs?

Watch on your mobile device >>

So you’ve saved your down payment, picked the perfect home and you have a closing date.  You’ve probably received a statement from your lender in advance outlining the closing costs and fees you’ll need to bring along with you to the closing.

Many times buyers have no idea what is included in this expense – seemingly the second largest chunk of change they need to fork over, next to the down payment.  To help clarify what all is entailed in the fees charged by your lender and paid toward the purchase of your home we spoke to an industry professional to get the details.

What Fees Are Included in Closing Costs?

Mainly lenders charge underwriting fees and processing – which together are considered “lending fees”.  In addition to those charges there are a few more routine but necessary steps adding to the closing costs.  These include the cost of having an appraisal done on the new home, pulling a credit report on the borrower, obtaining a flood certification as well as closing title fees on the closing date.  Additionally, prepaid interest and post-paid property tax are also items we see incorporated in closing costs.

Do These Fees Vary From Lender To Lender?

This is one of the main areas, in addition to minor fluctuations in current interest rates that lenders compete with each other for new loans.  We caution against paying any origination fees and discount points, which add to a percentage of your loan amount.  Each lender will charge varying underwriting processing fees but appraisals usually cost within the typical range of $325 and up.

How Much Can a Seller Contribute to Closing Costs?

The maximum amount a seller can pay in closing costs is about 6% and with the market being controlled largely by buyers, many sellers offer concessions in the way of paying all or a portion of closing costs.  In fact, savvy buyers know this going in to the deal and put this condition as part of their offer. Saving as much as several thousand dollars or more, this is a huge plus-point for buyers in today’s market and one that is regularly being utilized.  Since closing costs can be incorporated into the loan this can also affect the interest rate buyers end up getting by a nominal amount.

~
It is a good idea to check with your lender or potential lenders if you are still shopping around to find out exactly what is included in their closing costs.  Be sure to consult with your Realtor to compare the numbers and confirm whether you are getting the best deal.  Also, it might be more beneficial to work with lenders in your Realtor’s preferred network of vendors.

Looking Back at 2011: What Were the Numbers?

Watch on your mobile device >>

Now that 2011 has ended and we are looking forward to successful year in 2012, I wanted to take a moment to look back at the real estate numbers that we got for December 2011.  People ask me all the time how the real estate market is doing, and now we have some concrete numbers that I'm able to share with you.

In the summer of 2011, the greater Milwaukee area saw 832 single-family homes go under contract.  That's actually a 27% increase over December of 2010.

In fact, we sold more homes in December that we did in November of 2011.  That's a great improvement and shows an uptick in the market.

In the summer of 2011, the Roth team actually sold 19 homes.  It is now mid-January, and we've already gotten 14 accepted offers for the month.  That shows that 2012 is off to a great start in our real estate marketplace.

Another interesting and encouraging number is that we are now at the lowest level of standing inventory since 2009.  Our area has under 9000 homes on the market currently.  That means that it is a great time to buy or sell right now.  Sellers will have much less competition on the market, and buyers still have plenty of homes to choose from that are holding their values.

Of course, buyers are always interested in what the interest rates are doing.  Right now we are seeing 30 year fixed interest rates as low as 4% and 15 year fixed interest rates as low as 3.25%.  Believe it or not, there are also adjustable rate mortgages as low as 2.75% interest.

As always, we want to help you with any of your real estate needs.  Please give us a call or drop us an e-mail if you have any questions or concerns.  We also love your referrals, so please continue to send your family and friends our way.

Exploring the Main Differences That Makes a Short Sale a Better Choice Than a Foreclosure?

Watch on your mobile device >>

Just a couple years ago, most people usually thought they had to give up their home in a foreclosure when they faced a financial stonewall.  However, since then the phenomenon of short sales has been on the rise, leaving homeowners a bigger, better and brighter option for the present and future.  In this article, we explore the comparative differences between the two so you can gain an edge when deciding which is better for you.

Purchasing Power

After walking away from your mortgage through a foreclosure, you can expect to feel the negative impact of it for five years, in terms of being able to purchase another home.  Even then, like a bankruptcy, a foreclosure is something you will perpetually have to report no matter how long it has been since the home went into foreclosure.  

Though these days you see a lot of talk about the financial and credit impact foreclosures have on homeowners, the unseen part of it is something to be dealt with.  Going through this process can leave a lasting emotional hole in people who otherwise were law-abiding citizens, going about their normal lives when all of a sudden they are faced with severe financial hardship and must resort to extreme measures.  That, or if the value of their home has dropped well below the amount they paid for it and they see very little hope for the future.

Short sales are much simpler.  They will affect your purchasing power for a mere two years, often just the amount of time it takes to get back on one’s financial feet.  Not only that, there is no requirement to report a short sale transaction.

Credit Outlook

There are two main areas that are of concern when it comes to your credit – your credit score and your credit history.  In case of a foreclosure, credit scores drop a whopping 200 to 300 points.  This can have a significantly negative impact on your ability to purchase big-ticket items or secure loans in the future.   Not to mention it takes years to rebuild a credit score that has dropped that low.   In terms of credit history, a foreclosure remains visible on your credit report for anywhere from ten years or more, rendering each future potential lending transaction either useless or very hard-pressed at getting approved.  The overall impact you will see on your credit will be for about three years.

Short sales are far easier on your credit outlook, in that the point drop is only about 50 on average and the transaction itself will impact your credit profile for as relatively little as 12 to 15 months.  The one thing to keep in mind is that if you have defaulted on any payments or if you already have a weak credit profile, the post-short sale point drop on your credit report can be more than just 50.  Also, there is no formal reporting or declaration of a short sale on your credit report like a foreclosure although the transaction will show up as either settled or not paid in full.

Amount Still Owed

Usually there is a gap in the amount owed after owners walk away from a property and the bank assumes responsibility.  In case of a foreclosure, given the amount of processing time and resultant vulnerability and exposure of the property, the value can and often does drop greatly after vandalism and from sitting there unused.  The Deficiency Amount (also called Judgment Amount) is the difference that remains after the bank calculates what was owed on the property at the time of foreclosure and when they sold the home. Because of this vandalism and vulnerability, the amount of value drop is far more than with a short sale, when the homeowners are still residing in the property during processing.  The bank has the legal right to pursue homeowners for the amount difference.  

Short sales differ in that not only is the deficiency amount much less but also, your Realtor can negotiate a waiver of that amount so you don’t have to pay for it.