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Friday 07/28/2017 Mortgage Rates

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Mortgage Closing Costs

The closing costs for a mortgage are the fees you include in your loan to be distributed between all affiliates involved in your real estate transaction in order to seal the deal.


How Long Does It Take to Close a Loan?

The closing period itself starts the day you get preapproved (not prequalified) for the loan and ends on day thirty. If your mortgage plan does not follow federal underwriter guidelines then extensions can be made for a closing period of forty-five days.

For more on the differences between preapproval and prequalification, click here.

Just What Are the Closing Costs?

On average, closing costs fall between 2-5% of the total cost of the property. For example, if the cost of your new home is $300,000, your closing costs will be around $6,000 - $15,000. 

The lender will issue you a Loan Estimate after loan approval and a Closing Disclosure statement (five pages long) before the closing date. Both of which will detail what the closing costs will be and to whom they will be distributed. After you've assessed both documents and closing costs have turned out to be too high, you can choose to walk away and go with another lender. 

A part of what you pay in closing costs goes towards all of whom that contributed to the transaction. The services provided by all affiliates include:

  • The credit report, proof of employment, income, assets, debt, title verification, and title insurance documents assessed by your lender.
  • Lending, appraising, escrows, surveying, title searching, and loan discount services provided by your lender.
  • The services provided by present attorneys.
  • The home seller's part of the deal.

The 45-Day Interest Rate Lock

The 45-day interest rate lock feature protects your mortgage plan and keeps its interest rate fixed for the full duration of the closing period until you're ready to go through with the closing process. This will buy you time and security to plan effectively but you will incur a higher interest rate of 0.125% on top of the existing one.

How to Avoid Closing Costs

No-cost mortgages are available but they come with the price of paying for higher monthly payments, or they will simply be rolled into the interest on top of the principal amount that you owe.

What You Need to Bring on Closing Day

Gather all the paperwork that you'll need for the day of closing. The documents should include the Loan Estimate, the Closing Disclosure statement, flood insurance, property taxes, home appraisal, and the contractual agreement between you and the seller.

The Part You Play on Closing Day

You will be signing on the dotted line of up to twenty-four contracts, the most important of which are the following three:

  • Deed of trust: Which declares rights to the lender against your property if you fail to pay the loan.
  • Mortgage note: Which legally binds you and your lender to the terms and regulations of the mortgage deal.
  • Deed of sale: Which transfers ownership rights of the home from the seller over to you.

 

The Documents You'll Receive Upon Closing

 

The Document What the Document Entails
Mortgage note (aka borrower's note) A promissory note that legally binds you to fulfill the mortgage payments, the size of the loan, the conditions of the loan, and what the lender can charge you with if you don't hold up your side of the deal.
Mortgage or deed of trust A document that declares rights to the lender on your property in the case that you don't fulfill your financial obligations to them.
Deed of sale (conveyance deed) Shows the transferring of rights from the seller to the buyer.

 

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