The Home Buyer's Korner

Information presented should be used for educational purposes only.

June 17th, 2015

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GREATER WAIPAHU HAWAII

The Home Buyer’s Korner

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Closing Costs & Escrow Accounts

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It’s not just about the rate when shopping for a mortgage. Home buyers need to understand the importance of taking closing costs into account. While some closing costs are the same for all lenders, the programs offered may increase or reduce the amount of closing cost a home buyer is burden with when purchasing a home.

Most lender offer an escrow account for things like property taxes and insurance and many more require home buyers who have a mortgage establish an escrow account. If you’re required or want to set one up, most lenders require it be funded with a mathematical formula that provides about 14 months’ worth of property taxes and insurance when they come due.

Your title agent will calculation a pro-rated amount from the day of closing and collect any property taxes that will come due from the last property tax date to the day of closing and collect those taxes from the seller. You’ll be obligated to pay the remaining estimated property taxes due from the date of closing to the next due date for the property tax on your home. This can represent several hundred to several thousands of dollars depending on the property taxes associated with a property. While everyone has to pay property taxes, finding a home in a low tax area can significantly reduce the cost of closing on a loan.

So, explaining property taxes further we’ll assume property taxes are due once a year on November 1st of each year and you’re schedule to close on Jun 30th. As stated earlier your title agent will determine what the last property tax rate was and pro-rate the seller’s portion. If property taxes are three thousand a year, the seller property taxes due based on your closing date of Jun 30th would be $2000.01 or eight months of estimated property taxes and you own the remaining four months or $999.99, plus the require reserves of two months.

Additionally, mortgage payments are paid in arrears and not in advance like rent, so your first payment based on a Jun 30th closing would be Aug 1st. Your lender will collect 1/12th of the estimated property taxes with your first and consecutive payments. Therefore you will actually pay one month of taxes at closing plus two month for reserves with the three remaining months to be collected in your first three house payments to make a full payment due on your annual property taxes.

It’s best to discuss in detail with your real estate agent just how much money you have for a down payment and closing cost, but even if you don’t have any savings a real estate agent can still help you purchase a home. They might point you to homes that qualify for a USDA Zero Down Home Loan Program and work with the seller to pay your closing cost or even finance your closing cost into the loan.

Sellers are often able to pay all or part of a home buyer’s closing cost and while you want to get the best deal possible, the sale price may not be the only factor you should be interested in. Although a seller does not have to offer any concessions, they could potentially provide hundreds or thousands of dollars in seller concessions to help you finance your home. If you’re cash strapped, work with your real estate agent to consider an offer that is attractive to your seller and includes seller paid closing cost.

Many city and states housing authorizes offer down payment assistance programs for first time home buyers that will assist you with the down payment and some or all of your closing cost.

Most lenders can also offer lender credits to closing cost and will charge you a slightly higher interest rate, which enables many cash strapped home buyer the needed funds to pay closing cost. While lender credits aren’t counted toward the down payment, it can significantly help anyone who may not have the thousands of dollars to pay for the various closing cost involved in purchasing a home.

A home buyer can save a lot of up-front cost by talking first with a real estate agent and loan officer before looking for a home and that doesn’t cost you a thing. By doing some research about down payment requirements, closing cost and allowable credits toward closing costs, those who may have felt that home ownership was beyond their reach may be able to achieve the dream with a little help along the way.

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HAWAII HOME OWNERSHIP TOOLS

Your Home Purchasing or Refinancing & Renovation Tools,

Home Improvements, Home Renovations,

Mortgage Loan Officers, Real Estate Agents & General Contractors

are ready to assist you with your home purchase.

Here are just a few of the home improvements

you might consider with any Home Renovation loan

Repair or replace a roof

Install, replace or repair gutters and downspouts

Replace, repair or upgrade your HVAC system

Repair or replace plumbing

Install, repair or replace electrical systems

Kitchen remodeling (including the purchase and installation of appliances)

Bathroom remodeling, Full interior painting, Total exterior painting

Repair or replace a septic system and/or well

Disability access (wheelchair ramp, elevator, widen doorways)

Build, repair or replace deck, patio or porch

Basement waterproofing and finishing

Abatement/Stabilization of lead-based paint hazards

Replace old windows, Room additions, Finish an attic

Add a second story to your home

Replace a termite damaged sill plate (a water-damaged sill plate also)

Possible landscaping items such as correction of grading & drainage problems,

tree removal, repair a driveway and sidewalks

FHA 203K

Your Home Purchasing or Refinancing & Renovation Tool

Mortgage Loan Officers, Real Estate Agents & General Contractors

are ready to assist you with your home purchase

FANNIE MAE HOMESTYLE

The Conventional Alternative to FHA 203K

Great for Real Estate Investors and Second Home Renovations

Mortgage Loan Officers, Real Estate Agents & General Contractors

are ready to assist you with your home purchase

USDA RURAL DEVELOPMENT

Up to $10K for Home Improvements, Renovations or a Simple Remodel

Mortgage Loan Officers, Real Estate Agents & General Contractors are ready to assist you

A SIMPLE HOME SHOPPING INSPECTION TOOL

Organizing your home shopping experience affords a wise decision-making process.

This simple home inspection tool makes your ultimate buying decision a smart one.

To print this document click on “Open in New Window” located at the lower right corner;

click on “File”; then click on “Print”. In the center of the screen you will

have the option to “Create A Printable PDF of the Presentation”.

START YOUR PATH TO HOME OWNERSHIP TODAY

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