The good, the bad and the UGLY about Closing Costs

Cha-ching.

You're in escrow and found the house of your dreams and OUCH you get the closing cost estimate from your lender.

The Lowdown on Closing Costs

When you get a mortgage, you will need to pay closing costs, which are fees – charged by lenders and third parties -- related to the purchase of the home. So, in addition to owing the lender the down payment on the home and the principal and interest related to the mortgage, you will also owe the lender and third parties closing costs, which you usually pay at the time that you close on your mortgage. Most of the time, it is the home buyer who pays the closing costs, rather than the seller, though on some loans such as VA loans, the seller pays a portion of these costs.

What charges go into your total closing costs?

 

Closing costs vary widely based on where you live and the property you buy. Closing costs often include things such as:

• A fee for running your credit report.
• A loan origination fee, which lenders charge for processing the loan paperwork for you.
• Attorney’s fees.
• Charges for any inspection required or requested by the lender or you.
• Discount points, which are fees you pay in exchange for a lower interest rate.
• Appraisal fee.
• Survey fee, which covers the cost of verifying property lines.
• Title insurance, which protects the lender in case the title isn’t clean.
• Title search fees, which pay for a background check on the title to make sure there aren't things such as unpaid mortgages or tax liens on the property.
• Escrow deposit, which may pay for a couple months' property taxes and private mortgage insurance.
• Pest inspection fee.
• Recording fee, which is paid to a city or county in exchange for recording the new land records.
• Underwriting fee, which covers the cost of evaluating a mortgage loan application.

How much will you pay in closing costs?

Typically, home buyers will pay between about 2 and 5 percent of the purchase price of their home in closing costs. So, if your home cost $150,000, you might pay between $3,000 and $7,500 in closing costs. On average, buyers pay roughly $3,700 in closing costs, according to a recent survey.
Lenders are required by law to give you a good faith estimate (GFE) of what the closing costs on your home will be within three days of when you apply for a loan. But these are just an estimate, and many of the fees listed on the GFE can legally change by up to 10 percent, potentially adding thousands of dollars to your final closing cost bill. Within a day of your closing, the lender should give you a HUD-1 settlement statement, which outlines closing costs. Compare this to your GFE and ask the lender to explain what each line item on your closing costs is and why it is needed. Often, many of the fees that make up closing costs are negotiable, and some are completely unnecessary, especially things such as high administrative, mailing or courier costs charged by your lender. If the closing costs come in high, you can walk away from the loan; there are plenty of lenders who might be willing to offer you lower closing costs.

How can home buyers avoid closing costs?

You can also avoid upfront closing costs by getting a no-closing cost mortgage, in which you don’t pay any of the closing costs when you close on the mortgage. Typically, when a lender offers a deal like this, it does end up costing you in the long run: The lender may charge you a higher interest rate on the loan for not paying closing costs, or the lender may wrap the closing costs into the total mortgage owed, in which case you end up paying interest on the closing costs. Finally, home buyers can negotiate with the seller over who pays these closing costs. Sometimes the seller will agree to assume the buyer's closing costs, but only if it's the right market.

Happy hunting!!

Can Pets Hurt a Home Sale?

Dogs do the darndest things when they're bored. Take Squishy, for instance. Lauren came home late one night from her job as a nurse to find that Squishy –her usually well-mannered dog – had torn her sofa to shreds, right down to the woody skeleton.
Wading through the chunks of foam and scraps of distressed leather, she noticed something else: Squishy had enough time to not only disassemble the sofa but also to chew up the living room baseboards.
While a ruined sofa won't impact a home's value, gnarled-on baseboards most definitely will.

Americans Love Their Pets

Over 43 million American households own a dog, and over 36 million own at least one cat, according to the American Veterinary Medical Association. It's unclear how many of these households are owner-occupied and how many rented, but since 65.5 percent of Americans own their homes, it's probably safe to say that many pet owners are also homeowners.

The various dog-shaming websites prove that pets behaving badly is sometimes funny – especially if it's someone else's pet acting up. When it's your cat or a neighbor's pooch committing the atrocities, though, you may pay dearly with a lowered resale value on your home.

Impact on Home Value

Time business and money writer Brad Tuttle claims that pets "can potentially do pretty much the same thing to your home's value that some pets do on the rug." He goes on to credit a New England real estate agent for determining that owning a pet may have a negative impact on your home's resale value.
As evidence, the agent cited a cat owner's condo that sold for up to $30,000 less than it should have because of damage caused by the pets.

Then, there's the noise factor. Whining, barking dogs in a neighborhood can bring down resale home values by between 5 to 10 percent, Appraisal Institute's Richard L. Borges tells Business Insider.
There isn't much you can do about a neighbor's dog, but there is plenty you can do about your own.

De-Pet Your Home

Just as you'll need to clean and declutter your home before it goes on the market, you'll also need to de-pet it. This involves getting rid of not only any damage the pet has caused, but also the hair, stains and, most of all, odors. Start by getting rid of the hair. You'll need a heavy-duty vacuum for the job. Consider having the upholstered furniture dry-cleaned, launder or dry-clean the drapes, and shampoo the carpets.

Carpet: The Stink Magnet

Cat urine in the carpet is one of the hardest odors to get rid of, according to Neeraj Gupta, director of product research and development at ServiceMaster Clean. "Oftentimes," he tells MSN's Marcie Geffner, "you have to remove the carpet, remove the pad and seal the floor, and then replace the carpet and the pad."
If you think you can fix the problem by shampooing the carpet, you may want to pay close attention to those areas your pet chooses to use as a restroom.
First, though, you'll need to find those spots. Christopher Solomon of MSN Real Estate says that not all of the spots will be visible to the naked eye. He suggests that you consider purchasing a battery-powered ultraviolet light – also known as a black light. They are inexpensive and, used in a totally dark room, can pinpoint every bodily fluid that has landed on the carpet.

Other Flooring

If you have a hard-surface floor, you may think you've squeaked by the pet-odor problem. Think again. Even some hard surfaces can absorb urine. You'll need a chemical deodorizer and cleaner to rid the floor of the odor. If it lingers, you may need to strip and repaint, varnish or otherwise seal the floor.

Walls

If you own a dog, you are probably familiar with how they seem to love rubbing against the walls. Walk through your home with your eyes cast on walls and interior doors at doggy height and you'll no doubt notice discolored areas. Sometimes a Magic Eraser will remove the marks. If you've lived in the home for a long time, you may need to repaint to remove the doggy odor.
Cats like walls too – especially male cats, who tend to spray vertical surfaces, such as the backs of chairs and walls, according to the experts at Cornell University, College of Veterinary Medicine. Ask your veterinarian what she recommends to clean and deodorize the walls.

Showings

Your real estate agent will suggest that you not be home during showings. There are a number of reasons for this, but the most significant is that buyers are more relaxed if the homeowner isn't hanging around.
The National Association of Realtors® suggests removing the pet from the home during showings as well. If you'll be home, this is easy, just take the dog for a walk or drive.
If you will be working during showings, you'll need to come up with an alternative for your pet. Here are a few places to take your dog during showings:
Doggie Daycare – This one is ideal. The dog gets a day of socializing and playing, and potential buyers get to tour the home in solitude.
Groomer – An obvious win-win.
Veterinarian – Use the opportunity to get the dog or cat a checkup and shots.
Professional Dog Walker – Hire a dog walker to remove the dog from the home during showings.
Life is chaotic and full of unexpected events when your house is on the market. It's important to remain flexible and accommodate last-minute showings if you want to get the home sold. While pets may be members of the family, they are distractions to buyers, so it's important to decide beforehand how you'll deal with them while the home is for sale.

3 Things to Consider Before Buying a Town House

Have you ever noticed how the terms "town house" and "condo" are sometimes used interchangeably? This is most likely because both types of housing structures may be governed by homeowners associations. That, however, is where the similarity between the two ends. Comparing condos with town houses is akin to comparing apples and oranges.
When most consumers hear the word "condo," they picture a unit in a larger structure. For the most part, this is accurate. The problem, though, is that "condominium" is actually a form of ownership, not a type of structure. There are three major types of homeownership:

1. Condominium
2. Fee simple
3. Cooperative

Condominium owners own the interiors of their units and share ownership of the common areas. "Town house," on the other hand, describes a type of structure – one that is typically two or more stories and attached to one or more other town houses, each with its own front door.
In some parts of the country, town houses may be owned as condominiums or the homeowner may own it fee simple – in which she owns the building and/or land in its entirety.
As you can see, the questions to ask if you are thinking of purchasing a town house will be quite different than those you'll consider when purchasing a condominium unit. Let's take a look at three of the most significant factors you should consider.

1. Homeowners Association

While not all town houses are governed by homeowners associations, many are. This fact opens up a can of worms when considering whether to purchase. HOA fees can be quite expensive, so you'll need to take them into account when determining how much you can afford to spend on housing every month.
During the purchase process, you'll be given a pile of HOA-related paperwork, and you'll need to read every word of every page – or have your attorney do so. You'll want to know if the HOA is solvent, how often it levies assessments and if there is pending litigation, among other issues.
Finally, you'll need to consider if you want to live in an area managed by an association. Some people prefer the structure that an HOA affords while others find that structure too confining.

2.  Getting Financed

Purchasing a fee simple town house is identical to purchasing a detached, single-family dwelling as far as lenders are concerned. If the town house is owned as a condominium, lending becomes a bit trickier.
Owner-occupied homes tend to be maintained better than those used strictly as rentals. Lenders understand this and make it a part of the lending decision. Find out the ratio of owner-occupied to tenant-occupied units before making an offer. If it exceeds 30 percent, you may not be able to get a mortgage for it.
Determine the percentage of homeowners that are delinquent in paying their HOA dues. This is critical information because banks typically won't lend to anyone wishing to purchase a town house where the HOA delinquency rate is more than 15 percent.

3. Exit Strategy

If you're using the purchase of a town house as a springboard to the future purchase of a detached home, you'll want to plan an exit strategy. Yes, it seems silly to consider moving before the ink is dry on the purchase agreement, but it's necessary to achieve your future goals.
Building equity in a home takes time and, depending on market conditions and the type of home you own, it may take longer with a town house. All things being equal (location, proximity to good schools, etc.) a single-family home will appreciate in value quicker than a town house. In reality, the opportunity to build equity in the first few years of ownership of any type of home is minimal unless you pay an enormous down payment.
Ask your real estate agent to give you statistics on town house sales in your area over the past year. Check the average days on the market. The longer a home remains on the market, the less money it eventually brings. Should you decide to purchase, ask your agent to keep you updated on the town house market in the future. Most agents are happy to do this.
Keep in mind that even when your equity begins building, your property taxes may rise. Property reassessments can take a bite out of how much equity you're able to build.
Living in a town house is ideal for those who want the benefit of homeownership at a cheaper price and without some of the headaches that come with a detached home. Choose your town house wisely and with an eye toward future market value.