Escrow & Closing Costs - Q & A
Q: How does one save on closing costs?
A: Studies show that closing costs are often more costly than many buyers expect, and can average 2 to 3 percent of a total home purchase price.
Here are ways to save on closing costs:
* Negotiate with the seller to pay all or part of the closing costs. If the seller agrees and is paying part, the lender must agree to this as well as the seller.
* Get a no-point loan. The trade-off is a higher interest rate on the loan and many of these loans have prepayment penalties. But buyers who are short on cash and can qualify for a higher interest rate may find a no-point loan will significantly cut their closing costs.
* Get a no-fee loan. Usually, though, these fees are wrapped into a higher interest rate though it will save you on the amount of cash you need upfront. * Get seller financing. This kind of arrangement usually does not entail traditional loan fees or charges.
* Rent the property in which you are interested with an option to buy. That will give you more time to save for the upfront cash needed for the actual purchase.
* Shop around for the best loan deal. Each direct lender and each mortgage brokerage has their own fee structure. Call around before submitting your final loan application.
Q: What contingencies should be put in an offer on a home for sale in Houston, TX?
A: Most offers include two standard contingencies: a financing contingency, which makes the sale dependent on the buyers' ability to obtain a loan commitment from a lender, and an inspection contingency, which allows buyers to have professionals inspect the property to their satisfaction.
A buyer could forfeit his or her deposit under certain circumstances, such as backing out of the deal for a reason not stipulated in the contract.
The purchase contract must include the seller's responsibilities, such things as passing clear title, maintaining the property in its present condition until closing and making any agreed-upon repairs to the property.
Q: Who do I contact for more information on closing costs?
A: For more on closing costs, ask for the "Consumer's Guide to Mortgage Settlement Costs," Federal Reserve Bank of San Francisco, Public Information Department, P.O. Box 7702, San Francisco, CA 94120, or call (415) 974-2163.
Q: What are closing costs?
A: The fees for services and the taxes or special interest charges that surround the purchase of a home are the closing costs. Closing costs also include upfront loan points, the title insurance, escrow or closing day charges, document fees, prepaid interest and property taxes. These costs must be paid once the home is closed, that is unless the charges are rolled into the loan itself.
Q: Who pays the closing costs?
A: Either the home seller or the home buyer can pay the closing costs. It all depends on what the buyer and seller negotiates and the local custom.
Q: Why do I need to have a title report?
A: A clear title report ensures you, the buyer, that there are no liens placed against the prior owners in addition to any documents which may restrict your use of the property. Even though you want to believe that the home you have found is picture perfect, having a title report is suggested.
Preliminary title reports provide you with the opportunity to review any impediment that could prevent a clear title from being bestowed unto you.
It is important, when reading preliminary reports, to thoroughly check the extent of your ownership rights or interest. “Fee simple” or “fee” is the most common form of interest, which is the highest type of interest and owner can have in land.
Liens, restrictions and interests of others excluded from title coverage will be listed numerically as exceptions in the report.
Interests of any third parties, such as easements granted by prior owners that limit use of the property may have to be considered. Prior to purchase, some buyers attempt to clear these unwanted items.
A list of standard exceptions and exclusions not covered by the title insurance policy may be attached.
Included in this section are items such as any laws governing building and zoning that the buyer may want to investigate a bit further.
