The Home Buyer's Korner

Information presented should be used for educational purposes only.

March 7th, 2015

Guy looking up in color

GREATER SHREVEPORT, NEARBY CITIES & PARISHES

The Home Buyer’s Korner

Google+ RE Community

Google+ Mortgage Lender Community

Google+ General Contractor Communities

Understanding Closing Costs

Closing Cost

With mortgage interest rates at near or record lows many lenders are advertising their Annual Percentage Rates or APR under 4%, but what many home buyers aren’t familiar with is, with these low APR’s closing cost has often increased. Recently analysts have shown that currently closing cost have increased about six percent in the past year.  Much of this has come from additional cost lenders have incurred due to regulatory changes and passing the cost to home buyers. 

In this post we’ll discuss ways to ensure you not only get a good rate, but also how to compare closing cost to determine which lender is giving you the best deal. 

All mortgage loans require closing costs.  You’ll either pay for them in cash, finance, or have a third party cover them. Third parties normally include either the seller or the lender. If the seller pays them, it pretty straight forward.  At closing your title agent will collect the appropriate fees from the seller and disburse them accordingly. If you lender pays the closing cost it’s done by charging you a higher than normal interest rate, consequently the lender will get what’s called premium pricing for the higher rate from the loan servicing mortgage lender and use some or all of these fees to cover your closing cost. Mortgages, where the costs are paid by the lender in full are known as “zero closing cost mortgage loans” and they can be to your advantage, depending on how long to plan to own your home.

Mortgage rates for a zero closing cost mortgage loan typically are priced at about one-eighth to one-quarter percentage higher than a mortgage for which the home buyer would pay their own closing cost by the seller.  If you have sufficient fund to pay your closing cost in cash and want to see which option best fits your needs, ask for a good faith estimate for a borrower paid and a zero closing cost mortgage loan.

Next have your lender provide you with an amortization schedule for both. Within your amortization schedules you’ll see the payment differential and you’ll be able to see if it’s to your advantage to pay the closing cost upfront or pay a little more each month and keep your money in reserve for as a rainy day fund.

With rates this low you probably won’t be refinancing anytime soon and if you intend to live in the home for years to come, paying the fees upfront probably is a good idea. However, if this is a starter home and you might sale in the not too distant future, you may want to pay a little higher monthly payment and keep your cash in reserves.

Only you know your short term and long term intentions. Knowing this, you’ll want to take your amortization schedule and locate both payments and deduct the lower from the higher payment. This is the difference you pay between the two.  Then multiply that figure to get it as close to the upfront closing cost your lender provided you.  From here you’ll know how long it would take to break even and helpfully you’ll have a good idea how long or short a timeframe you plan to live in the home to determine which option might be best for you.  

Closing costs are broken down into two categories – mortgage lender closing costs, which are fees the lender charges to offer you a loan like; discount points, origination fees, underwriting fees, processing fees, lender doc prep fees or broker fees. Title insurance, appraisal fees, credit report fees, tax service fees, escrow fees and any fees not directly paid to the lender for your loan are third party fees and shouldn’t be included in your analysis, as they aren’t part of the APR.

Lenders often give their fees unique names, which can make it difficult to compare specific loan costs between banks. This is why it’s better to compare TOTAL lender costs rather than any one specific line-item. Lender fees are summarized in Section 800 of the Good Faith Estimate your lender will provide.

Now that we’ve explained closing costs, let’s take steps to make sure you don’t pay more closing costs than you need.

The first rule is not to pay more discount point than you should. Discount points are one-time, upfront fee paid at closing, which lowers the mortgage rates. They’re paid as a percentage of your loan size and one discount point carries a cost equal to one percent of your loan size. A $300,000 loan with one discount point would require $3,000 in cost.

I recommend you begin your mortgage rate comparison by visiting Freddie Mac’s Mortgage Interest Rate Comparison website to see what the average rate home buyers pay weekly. Rates here aren’t to be construed as an absolute, as each home buyer has a different variable. For example, a home buyer with a 740 FICO and 20 percent down payment will pay a lower rate than a home buyer with a 620 FICO score and paying only 3.5 percent as a down payment. It’s all about risk, but you’ll see what the average interest rate is and it’s updated each week on Thursday at 10 a.m. The only best way to see what rate you’ll be offered is to shop around and compare.  Based on your unique circumstance and a little rate shopping, you’ll get a good idea of what rate you can expect.   

For home buyers who plan to keep their mortgage at least seven years or more would probably benefit paying discount points, but the best way to know this yet again, another amortization schedule.  This time you want one that provides you with a zero discount point rate and one or more with discounts point charged. What you will be looking for here is again the monthly payment for each rate and discount points, then depending on how long you plan on keeping your mortgage is the variable to determine and if paying point or not is best for you.

It’s also with noting that discount points have the secondary effect of lowering a mortgage loan’s APR. Because of this, lenders will often use discount points, as a way to make their rate look more attractive in the marketplace.  Never just look at APR, as closing cost vary and it’s really just a marketing tool lenders use to advertize.

One last topic to cover about discount points is they are tax deductible.  If you choose to pay discount points make sure you include them as a deduction along with any interest you pay for the year you close on your new home. 

Another way to reduce your closing costs is to lock your mortgage rate for the appropriate time frame. Rate locks are typically available in 15, 30, 45 and 60-day increments, with the shortest lock period normally having the best rate and/or discount points.  Be careful to choose a rate lock that’s at least as long as your estimated closing date, if not just a little longer.  It makes no since to get a 15 day lock if you don’t plan to close for 35 days. Conversely don’t let you lock expire. You can do this by making sure you get your loan conditions to your lender immediately, so they can get your mortgage application to underwriting as soon as possible.

If you put things off. You could go past your lock date and might have to pay an extension fee or be force to get a new lock at that days pricing, which could be higher than when you made application. Keep your closing costs low by selecting a realistic and appropriate rate lock for your loan.

ting that discount points have the secondary effect of lowering a mortgage loan’s APR. Because of this, lenders will often use discount points, as a way to make their rate look more attractive in the marketplace.  Never just look at APR, as closing cost vary and it’s really just a marketing tool lenders use to advertise.

One last topic to cover about discount points is they are tax deductible.  If you choose to pay discount points make sure you include them as a deduction along with any interest you pay for the year you close on your new home. 

Another way to reduce your closing costs is to lock your mortgage rate for the appropriate time frame. Rate locks are typically available in 15, 30, 45 and 60-day increments, with the shortest lock period normally having the best rate and/or discount points.  Be careful to choose a rate lock that’s at least as long as your estimated closing date, if not just a little longer.  It makes no since to get a 15 day lock if you don’t plan to close for 35 days. Conversely don’t let you lock expire. You can do this by making sure you get your loan conditions to your lender immediately, so they can get your mortgage application to underwriting as soon as possible.

If you put things off. You could go past your lock date and might have to pay an extension fee or be force to get a new lock at that days pricing, which could be higher than when you made application. Keep your closing costs low by selecting a realistic and appropriate rate lock for your loan.

VISIT OUR NW LOUISIANA PARISHES “HOMES FOR SALE” BOARDS

Livingston Homes for Sale

FIND HOMES THROUGHOUT NW LOUISIANA PARISHES

HUD $100 DOWN PAYMENT HOMES IN NW LOUISIANA PARISHES

USDA RURAL DEVELOPMENT HOMES IN NW LOUISIANA PARISHES

FIND FORECLOSURES IN SHREVEPORT & NW LOUISIANA PARISHES

FIND MORE FORECLOSURES IN SHREVEPORT & NW LOUISIANA PARISHES

LOUISIANA HOME OWNERSHIP TOOLS

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

FNMA HomeStyle FNMA My Community Mortgage FHA One-Time Close Construction Portfolio or VA home loan Homes for Sale REO Short Sales FNMA HomePath Properties HUD Homes USDA Homes Condominiums Co-OpsTownhomes Manufactured Homes Modular Homes Mobile Homes Log Homes Second Homes Investment Property 2-4 Family Custom Home Builders Custom Built Homes General Contractors Home Improvement Experts Kitchen & Bathroom Renovations Real Estate Brokers & Agents Mortgage Lenders Federal Credit Unions Community Bankers  Bienville Parish Arcadia Bienville Bryceland Castor Gibsland Jamestown Lucky Mount Lebanon Ringold Saline Bossier Parish Benton  Eastwood Foster Haughton Hinkle Plain Dealing Red Chute Caddo Parish Belcher Blanchard Caddo Cedar Grove Cut Off Junction  Gilliam Greenwood Hosston Ida La Rosen Lakeview Mooringsport North Highlands Oil City Reisor Rodessa Shreveport/Bossier City Anderson Island Estates Azalea Gardens  Estates Bellaire Estates Bellemead Estates Braemar Village Estates Broadmoor Estates Broadmoor Estates Broadmoor Terrace Estates Brownlee Estates Brunswick Place Estates Carriage Quarters Estates Clingman Park Estates Cobblestone Estates Cornerstone Estates Cross Creek Estates Cypress Bend Estates Dixie Gardens Estates Dogwood Park Estates Dogwood South Estates Ellerbe Road Estates Emberwood Estates Forest Hills Estates Gardens Of Southgate Estates Golden Meadows Estates Green Acres Estates Greenbriar Estates Hidden Trace Estates Highland Estates Highland Estates Kings Crossing Estates Kingston Plantation Estates Lakeside Long Lake Estates Lakewood Estates Legacy Estates Long Lake Estates Lucky Estates Madison Place Estates Magnolia Chase Estates Newcastle Estates Norris Ferry Crossing Estates Norris Ferry Estates Olde Oaks Estates Pecan Park Estates Pierremont Place Estates Plantation Estates Plantation Trace Estates Plantation Trace Estates Plantation Trace Garden Homes Estates Plantation Trace Garden Homes Estates Provenance Estates River Bend Estates River Bluff Estates Rosedale Place Estates Sherwood Forrest Estates South Ellerbe Estates Southern Trace Southgate Estates St Charles Court Estates St Charles Place Estates Stockwell Place Estates Stone Lake Estates Stone Lake Estates Stonebridge Estates Sunflower Place Estates The Colony Estates The Haven Estates The Orchard Estates Tiburon Estates Town South Estates Tuscany Crossing Estates Twelve Oaks Estates University Terrace Estates Wrenwood Park Estates Abel Acres Estates Acadiana Place Estates Ada Street Subdivision Airport Annex Estates Allendale Estates Allendale Heights Estates Andrews Estates Angelas Place Estates Arcadia Estates Arnolds Southern Hills Estates Aulds Broadmoor Terrace Estates Autumn Creek Estates Back Path Acres Estates Bagley Plantation Estates Bakers Acres Estates Barksdale Gardens Estates Barrett Subdivision Estates Barron Ridge Estates Bauman Place Estates Bay Hills North Estates Bedingfield Estates Behan Subdivision Estates Bella Vista #3 Estates Bellows Estates Beverly Hills Annex Estates Bickham Estates Big Oaks Estates Birchwood Estates Bistineau Terrace Black Bayou Estates Blanchard Estates Bocage Estates Bodcau Annex Bodcau Park Estates Bolinger Hills Estates Bolinger Park Estates Bossier Farms Estates Breckenridge Estates Brentwood Park Estates Briarcliff Estates Bridges Southern Hills Estates Brimmer & Moore Estates Broadacres Estates Broadview Estates Brookhaven Estates Brookwood Estates Brookwood Southern Hills Estates Bruce Park Estates Brushy Bayou Estates Bullen Estates Buncombe Park Estates Burgundy Oaks Estates Burgundy Ridge Estates Burton & Blands Estates Busby Estates Caddo Heights Estates Camp Joy Estates Cane Bend Estates Capitol Hill Estates Carriage Manor Estates Carriage Oaks Estates Carriage Oaks Crossing Estates Carriage Square Estates Carson Addition Estates Castanedo Estates Cattail Pointe Estates Cecile Place Estates Cedar Estates Cedar Grove Estates Cedar Grove Addition Cedar Point Estates Center Crossing Estates Central Park Estates Centre Crossing Estates Chapel Creek Estates Chasewood Estates Cherokee Hills Estates Cherokee Park Estates Cherry Hill Estates Chesterfield Park Estates Chrislo Estates Cinnamon Square Estates Claiborne Hills Estates Clover Estates Coleman Estates Coleman College Estates Coleman Park Estates College Estates Collinswood Estates Colonial Heights Estates Colonial Hill Estates Colonial Park Estates Colquitt Road Estates Cook Estates Cottage Ridge Estates Country Club Acres Estates Country Club Heights Estates Country Place Estates Crestridge Farms Estates Creswell Estates Cross Lake Estates Cross Lake Hills Estates Crossing At Wemple Estates Cumberland Estates Currie Acreage Estates Cypress Bay Estates Cypress East Grove Cypress Lake Estates Cypress Place Estates Cypress Point Estates Dana Farms Estates Daniel Young Henry Estates David Sunset Estates Dean Terrace Estates Deena Heights Estates Deep Woods Estates Deer Cove Estates Deer Creek Estates Deer Park Estates Deer Run Estates Del Charro Woods Estates Dixie Place Estates Dixon Estates Dogwood Estates Donald A Nelson Estates Doss Point Estates Duck Island Estates Dudley Square Estates Eagles Nest Estates East Cypress Lake Estates East Gladstone Estates East Kings Court Estates East Pointe Estates Eastgate Estates Eastwood On The Bayou Estates Eden Gardens Estates Edgewater Estates Edgewood Estates Elm Grove Estates Engleside Estates Espanita Village Estates Evangeline Oaks Estates Expressway Acres Estates Fairfield Addition Estates Fairfield Heights Estates Fairfield Oaks Estates Fairview Point Estates Fairway Forest Estates Featherston Estates Fernwood Townhomes Fertile Gardens Estates Fincher Park Estates Forbing Heights Estates Forest Glen Estates Forest Grove Estates Forest Park Addition Estates Forest Valley Estates Fountainbleu Estates Fox Chase Estates Fox Creek Estates Fox Crossing Estates Frank Graham Estates Frank Grawood Estates Freeman Place Estates Frontier Estates Frost Lumber Estates Galloway Addition Garden Valley Estates Garrett Tract Estates Garrison Tower Addition Gathright Estates Gibson Park Estates Gladney Estates Gladstone Estates Glendale Estates Glenwood Park Estates Godfrey Estates Grand Cane Estates Grawood Estates Gray Duck Estates Graywood Estates Greenbrook Estates Greenway Estates Greenwood Estates Greenwood Hills Estates H.O.Cloud Estates Harkey Estates Harkey Southern Hills Estates Hawthorne Estates Hawthorne Heights Estates Hickory Ridge Estates Hidden Acres Estates Hidden Valley Estates Hideaway Harbor Estates Highland Commons Highland Park Estates Highland Square Estates Hillcrest Estates Hills Of Bella Vista Estates Hilltop Estates Historic District Estates Hollywood Estates Holmesville Estates Homalot Estates Home Acres Estates Hosston Estates Hunt Estates Huntington Park Estates Hyde Park Estates Iklewood Estates Indian Hills Estates Indian Mounds Estates Inglesdie Annex Ingleside Estates Inverness Estates Irving Bluff Estates Island View Estates Jackson Graham Estates Jackson Square Estates JB Ball Estates Jefferson Heights Estates JM Clarke Estates John H Fetzer Estates John Mc W. Ford Estates John W. Wall Estates Jones Cypress Garden Estates Jones-Mabry Estates Judy Lane Estates Kallie Danielle Estates Kay Lee Park Estates Killen Farms Estates Kings Country Estates Kings Hwy Heights Estates Kings Point Estates Kings Towne Estates Kingston Forest Estates Kingston Square Estates Kingston Terrace Estates Kingwood Forest Estates Lafayette Estates Lake Shreve Estates Lakes At Cottonwood Estates Lakes At Olde Oaks Estates Lakeside Acres Estates Lakeview Estates Lakewood Marina Estates Lambert Park Estates Lambert Southern Hills Estates Latierra Estates Lavon Acres Estates Lawler Gardens Estates Leanin Oaks Estates Linfield Townhouses Linton Acres Estates Lintwin Hills Estates Linwood Gardens Estates Linwood Park Estates Lone Oak Estates Long Timbers Estates Longwood Estates Loralynn Estates Love Brothers Estates Lynbrook Estates Machen Estates Madison Park Estates Mallard Bay Estates Marble Subdivision Marks Meyers Estates McClung Estates McCrarys Southern Hills Estates McKenzie Place Estates Meadow Creek Estates Meadow Park Estates Meadow Park Heights Estates Meadow Wood Estates Meadowview Estates Merritt Estates Merrywoods Estates Milam Place Estates Millcreek Estates Millicent Place Estates Mimosa Gardens Estates Monrovia Place Estates Mooretown Estates Morningside Estates Mrs. Larry V. Hunt Estates Muller Acres Estates Murry Hill Estates Nelessity Estates Nob Hill Estates Normandy Village Estates North Acres Estates North Airline Estates North Caddo Estates North Cedar Grove Estates North Club Estates North Desoto Estates North Highland Estates North Highlands Estates North Pierremont Estates North Point Place Estates North Pointe Estates North Ridge Estates Northgate Estates Northgate Village Estates Northlake Estates Northside Addition Estates Northwood Hills Estates Northwood Trace Estates O. H. Haynes Estates Oak Alley Estates Oak Creek Estates Oak Forest Estates Oak Grove Estates Oak Hollow Estates Oak Park Subdivision Oak Ridge Estates Oaklane Estates Ockley Square Estates Old River Place Estates One North Place Estates Oneonta Estates Ormand Place Estates Page Bayou Estates Palmetto Estates Palmetto Beach Estates Palmetto Park Estates Palmetto Place Estates Parham Park Estates Parkhurst Estates Parkland Village Estates Parkside Landing Estates Parkview Estates Parkway Commons Estates Pat And Mike Estates Patterson Estates Pease Meadow Estates Pecan Farms Estates Pecan Grove Estates Pelican Place Estates Pepper Ridge Estates Pepper Tree Estates Perfect Place Estates Permenter Estates Pierremont Estates Pierremont Acres Estates Pierremont Resub Estates Pierremont Ridge Estates Pine Estates Pine Croft Estates Pine Forest Estates Pine Forest South Estates Pine Hill Park Estates Pine Hills Estates Pine Island Estates Pine Oak Terrace Estates Pinecrest Estates Pinecroft Estates Pinehaven Estates Pinehill Estates Pinehurst Estates Pines Edge Estates Pinetree Acres Estates Piney Forest Estates Plantation Park Estates Plantation Pines Estates Pleasant Lake Estates Premeire Park Subdivision Preston Bay Estates Princeton Estates Queensboro Annex Queensborough Addition Querbes Subdivision Quiet Acres Estates Quiet Cove Estates Quiet Place Woods Estates R. N. Robinson Estates Rambin Farms Estates Ranch Acres Estates Ranchland Acres Estates Reunion Estates Rices Southern Hills Estates Ridgecrest Estates Ridgewood Estates River Oaks Estates River Ridge Estates Riverbrooke Estates Rolling Meadow Estates Rose Hollow Estates Rose Park Annex Subdivision Roten Ranchettes Estates Sagewood Estates Salisbury Park Estates Sand Beach Estates Savannah Place Estates Schex Place Estates Seven Pines Estates Shadow Pines Estates Shady Grove Estates Shady Oaks Estates Shreve Hills Estates Shreve Island Estates Silver Pines Estates Silver Pines Village Simmons Estates Skidmore Estates Slattery Park Estates Sleepy Hollow Estates Sligo Pecan Grove Estates Smithwood Estates Snyder Gardens Estates Soda Bluff Estates South Gate Estates South Highland Park Estates South Highlands Estates South Lake Addition South Port Country Estates Southern Gardens Estates Southern Heights Estates Southern Hills Estates Southern Terrace Estates Southfield Park Estates Southland Park Estates Southpark Country Estates Southport Country Estates Southridge Estates Spokane Estates Spring Creek Estates Spring Lake Estates Spring Lake Estates Springhaven Estates Springlake Estates Squirrel Point Estates Steeple Chase Estates Sterling Ranch Estates Stevewn Israel Estates Stinson Estates Stockwell Place Estates Stockwell Villas Estates Suburban Acres Estates Sugar Creek Estates Summer Grove Estates Summerwood Estates Sun City Estates Sunset Acres Estates Swan Lake Estates Sweetwater Oaks Estates Swimming Club Lane Estates T And P Estates T.d. Connell Estates Taliaferr0 Place Estates Tall Timbers Estates Tanglewood Estates Tara Estates Tealwood Estates Terrace Acres Estates The Cedars Estates Thornhill Estates Three Creeks Estates Thrift Estates Tiburon Estates Timber Ridge Estates Timberline Estates Tom Weaver Addition Tower Estates Town North Estates Town S Village Green Estates Townhomes Of Southgate Estates Turtle Creek Estates Tuscany Villas Estates Twilight Meadows Estates Twin Branches Estates Twin Oaks Estates Twin Point Estates University Estates University Heights Estates University Place Estates Uptown Park Estates Vance Heights Estates Vera Peterson Estates Victorian Pointe Estates Victory Place Estates Villa Contessa Estates Village At Downs Estates Village Green Estates Village Square Estates Vinetree Estates Vos Road Estates Walker Estates Waller School Terrace Estates Washington Terrace Estates Waters Edge Estates Waterside Estates Waterwood Estates Waverly Estates Webb Place Estates Webster Investments Estates Wedgewood Estates Werner Park Estates West Acres Estates West Gate Estates West Gladstone Estates West Morningside Estates Western Hills Estates Western Woods Estates Westwood Park Estates Whispering Pines Estates White Acres Estates Wildwood Forest Estates Williamine Estates Willow Glen Estates Willow Lake Estates Willow Point Estates Willow Ridge Estates Wilson Estates Wimberly Land Estates Windsor Place Estates Winnie Camp Estates Winter Garden Estates Wood Pine Place Estates Woodlake North Estates Woodlake Ridge Estates Woodlake South Estates Woodland Hill Estates Woodland Springs Estates Woodlands Estates Woodlawn Estates Woodpine Place Estates Woodstone Estates Woolworth Oaks Estates Worms Partition Estates Wright Island Estates Yarborough Estates Summer Grove Vivian Werner Park Desoto Parish Frierson Gloster Grand Cane Keatchie Logansport Longstreet Mansfield South Mansfield Stanley Stonewall Lincoln Parish Choudrant Dubach Grambling Ruston Simsboro Vienna Red River Parish Coushatta Edgefield Hall Summit Martin Webster Parish Cotton Valley Cullen Dixie Inn Doyline Dubberly Heflin Minden Sarepta Shongaloo Sibley Springhill Winn Parish Atlanta Calvin Dodson Hatfield Jordan Hill Joyce Saint Maurice Sikes Winnfield

Join us at Real Estate Social

Comments are closed.