|
On the day you close on your new Costa Mesa home, you'll need cash for various fees other than your down payment and the prepaid property tax and homeowners insurance premiums. These additional fees are known as closing costs. Both buyers and sellers have their own closing costs.
Some closing costs will need to be paid up front when you first apply for your mortgage loan. A credit check for all applicants is an example of such closing costs. Remember though, even if you don't get the mortgage loan, this money is non-refunable.
Some other closing costs to keep in mind when evaluating your finances are:
- Title insurance fee
- Survey charge
- Loan origination fee
- Attorney fees or escrow fees
- Document preparation fee
- Garbage or trash collection fees
- Points - up-front interest paid in return for a lower interest rate. Each
point is one percent of the loan amount. Sometimes you can contract for the seller to pay
your points
You'll need to ask lenders about their closing costs when shopping around for interest rates. Some mortgage plans allow the seller to pay for some, or ALL of your closing costs; such as title insurance, escrow fees, and points. Certain closing costs can also be added to the amount of your mortgage loan, so be sure to ask for details.
Figuring Out Your Monthly Income
When configuring your monthly income, it's important to know that all parties' income who will be on the mortgage loan will be taken into account. You will also need to be prepared to provide proof of any other monthly income, such as alimony, child support, etc.
Figuring Out Your Monthly Debt
Your present monthly payments are of big interest to the lender. They want to make sure that you'll be comfortable and able to make your new monthly payments that you are applying for. Different mortgage plans consider payments on any debt that won't be paid off within, for example, six months, nine months, or a year.
Amount of Your Down Payment
Your down payment is paid in cash and is not included as part of the loan amount. Of course, the bigger your initial down payment is, the smaller your loan will be, which reduces the amount of your monthly payments.
Down payment requirements can vary to 0% on VA loans, to between 3 and 5% down on FHA loans, to the standard 20% down for the conventional loan. The amount you put down will also be determined mainly by how much cash you have available after paying closing costs, prepaid property taxes, and homeowner's insurance.
Most lenders will require that you carry private mortgage insurance (PMI) if you put down less than 20%. This insurance protects the lender and ensures that the loan will be paid off, even if you default. It usually adds approximately an extra half percent to the loan. FHA mortgages also charge for mortgage insurance premiums (MIP) in exchange for their low down payments requirements.
| 
