What are the Costs?
While some people can buy a home with zero money out of pocket, others will require more, depending on the type of loan and how much they can qualify for. At Green Family Mortgage we can help you figure out how to best maximize your financial situation and leave you feeling comfortable. Below are some costs you can typically expect:
Realtor Costs
A realtor representing the buyer performs multiple duties. They help you shop, open doors, give invaluable inspection, neighborhood, and resale advice, and the most crucial: help you negotiate the sale terms with the seller and their realtor. Realtors typically charge a % of the sales price and in a lot of cases, negotiate it into the sales price that is paid by the seller (so you would not need to worry about paying them out of pocket). This means in a typical transaction, buyers don't have any out of pocket realtor costs. However, this is all determined by the contract you and your realtor sign and work out together, before you start working with one another. To know if you will need to budget for any realtor fees, you will need to have that converstation with your realtor directly.
Mortgage Broker Costs
Green Family Mortgage does our job by brokering loans to many different lenders and charging them when we find one to give you a loan. Therefore in a typical transaction, we get paid through the lender's pocket at closing and not yours- meaning zero out of pocket costs for you.
However, most lenders will typically charge this back to you in the form of a "yield spread premium," which is just a fancy way of saying the "cost for an interest rate." But because we are able to shop many lenders on the market at wholesale rates, the interest rate we can find you is still better than one you can find at any retail bank location, leaving you with a cost competitive and low affordable rate. We've even asked our customers to comparison shop, and so far none of the comparisons have been better than our rates. And if someone does-- we guarantee to match it. It's a win win!
Closing Costs
Whenever you purchase or refinance your home there are many other parties involved in the transaction. Each of these different parties have fees they charge either the buyer or the seller for the work they perform on their behalf.
These costs usually include:
- an appraisal to determine home value
- title insurance to insure free and clear title/ownership of the property
- settlement fees to perform the closing and disburse funds from escrow
- underwriting or processing fees to underwrite the loan
- credit report fees from the credit bureaus to verify credit
- recording fees from the county to provide a legal public record and
- government taxes
Closing costs vary depending on sales price, loan amount, different lenders, title & escrow companies, different states and different counties. However, in most cases you can expect to spend between $2500-5500 in total closing costs. If you are refinancing you can often finance this into your loan so you don't have to pay any out of pocket costs. If you are purchasing a home, you can also finance the costs through seller-paid closing costs or through a lender credit towards your costs. Green Family Mortgage will help you estimate these costs so you can know exactly what to expect.
Prorated Pre-Paid Taxes and Insurance
You can decide as a buyer, if you'd like the property taxes and home insurance to be included in your total monthly mortgage payment or if you would prefer to pay those bills seperately on your own. When you pay property taxes and insurance monthly to the lender, the lender collects and holds them in an escrow/reserve account until the bills come due once a year, and then pays the property tax bill and the home insurance bill on your behalf. Therefore, at closing (and the start of your new loan), you will need to pay several months of property taxes and home insurance upfront to insure there is enough money in the account for those bills to be paid in the first year- plus a little extra to account for possible property tax increases in the next year.
The amount due at closing will vary based on the annual property taxes of the home (determined by the county), your annual home insurance premium (which is something you choose and shop for), and the date you close. In general, in Oregon, you can assume that you will need to put about 10 months of property taxes and about 15 months of home insurance into the escrow account upfront. The date of closing will determine how much of a prorated mortgage payment (prepaid interest) will be due. (If you close on the 15th of the month you will owe a half a month of interest at closing, to pay you up the 1st, when your first mortgage payment would be due. Once you get prequalified, Green Family Mortgage can make you a customized calculator that will help you to better estimate this amount. Like closing costs, these costs can be financed if you dont want to pay them out of pocket.
Down Payment
In addition to Closing Costs and Pre-paid taxes and insurance, most transactions will also require a down payment. These can range from 0% - 20% + depending on your situation.
Other Costs
Other costs that may be involved in buying a home include:
- Home Inspection Fees (to insure your home is safe and has no major repairs needed)
- Sewer Scope Inspections (to insure good working condition of your sewer pipes)
- Radon Testing (to insure there are no high levels of radon in the home).
- General Repairs
- Cosmetic Fixes
- Utilities
- HOA fees
(While many of these costs are not typically due at closing, nor part of your loan transaction, you may still want to consider them).
If you still have questions about costs involved, please give us a call 503-887-7333. We'd be happy to chat more about it!