subject: What On Earth Is The Difference Of Closing Expenses And Down Payment [print this page] This is usually a question that I get all the time. From some one looking into loans for a home that maybe interested in some real estate.
There are a few doubts I have about buying a home. First off, I would like to know the type of down payment involved for any first time home purchaser and then what if your credit rating score is not perfect???"
First I'm going to start out with the obvious on the down payment.Considering the money you might have is satisfactory to buy a place.Then strive to acquire some clarification which confuses many.On just how much you'll have to pay as down payment and closing charges.
Today, most of the loans are done by the Federal Housing Administration (FHA).FHA loans are govt. sponsored loans whcih expains the reason for their popularity. Since they are really the only ones with any money to lend.We won't be dealing too much about the other types of loans which are usually bank loans because they are conventional and may be too difficult to qualify for in today's market.So to get started, lets go through some First Time Home Buyer Information.
To do a FHA loan all you need CURRENTLY IS 3.5% down payment on a house.The keyword there is CURRENTLY, I would like to make sure that you got that.There are proposals within the Congress to increase the down payment on houses to 5%. Aside from increasing the down payment to 5% there is also the possibility that minimum fico scores may be increased and the PMI was just increased this year.The PMI stands for Principal Mortgage Insurance, which is solely for the benefit of the bank and is insurance in case the home owner is on default and it does nothing for the benefit of the homeowner.The closing costs in FHA loans include an upfront finance for a portion of the PMI.
In case you are contemplating on buying a house now, then keeps these things in mind. Or waiting for home prices to get lower or that super duper deal.Increase in down payment, difficult qualifiations for loan approval and high closing costs come about when home prices get lower.Since you do not qualify for a home any longer, the price of it would not be of much interest to you.So here is some food for thought, you wish to buy a home and qualify for it today but if you think it might become cheaper, what if you do not qualify tomorrow.
Closing costs and Down Payment this is something that seems to confuse most first time home buyers.The amount you need to pay based on your purchase price is known as down payment so it would be something around $3,500 for a home costing 100k.00 which affects the purchase price.Sometimes, few first time home buyers are shocked by the closing costs which are what you need to get the loan because they are usually more than just the down payment.
The cost you would pay to get the loan is the closing costs.As mentioned above, one factor in getting the loan is YOU pay for the PMI.Your taxes and your insurance which are your impounds also constitue your closing costs. Whcih is colleted upfront but the amount will depend on the time of the year because of the new property taxes. Let's consider it to be $3,000.00.Paying a point or no points does not mean that there are no loan costs.1% percent of the loan amount can also be a reference of paying a point.So on $100,000.00 loan which brings you a charge of $1,000.00.Then you need to consider the admin costs associated with there loan.Usually closing costs can be an additional 3% of the purchase price of the home.
So now getting back to just $3,500.00 is pretty much a small number BUT do not get discouraged because in today's market you can get the seller who is the BANK in the case of a foreclosure.Sometimes, the bank pays for some of your closing costs and that is if you are lucky.You should check often to make sure that your team and you are on the same page. By your team I mean your real estate agent that will help you negotiate with you on the contract and your loan officer that will help you get the loan.Who needs to know what you need to qualify for.
There are also other loans available depending where you live.There are places where you could get loans for 1% down payment and others where you could qualify for rural development loan with 0% down.There is a possibility of you getting a home with NO MONEY if in case the selling bank decides to pay for your closing costs and with 0% down payment.
Either way this is the first time in U.S. History shows that rates and home prices usually fall together.Interest rates are at record lows and they will go up again. There are many deals out there in the real estate market today.Don't miss this great opportunity.
