Escrow & Closing Costs - What Should You Know?

Escrow & Closing Costs - What Should You Know?

Let’s see… where were we? Oh, Yes! You’ve listed your home with me; we found a qualified buyer; and are now in Escrow. We are more than half way towards closing escrow and selling your home. But what happens now? And what should you know as we enter the home stretch?

A lot of things that you aren’t aware of happen between offer acceptance and the close of escrow. We all know about home inspections, buyer contingencies, and funding the loan. Under the best of circumstances it should feel like a smooth and seamless process, but there is always a driver who is behind the scenes making it happen.  The ultimate driver, would be your agent, in this case, Me!  I’m at the head of a great team of professionals who handle all of the details to help ensure that escrow closes. Included in my team of professionals are my Transaction Coordinator (TC), The Escrow Officer, and The Lender, among others.

The TC is my backseat driver and they will often communicate on my behalf and will create and send any necessary documents that may require your signature. The TC follows the property as it moves through the escrow process keeping an eye out for things that may delay closing. Such as inspections that have not been completed, repairs that the lender may require to be completed prior to Escrow closing, etc.

Let’s presume that escrow has moved smoothly along and we are now ready to close, and are sitting down to sign your closing documents. What should you be aware of now?

Well, for starters, Closing Costs. Here’s a breakdown of Closing Costs from the Sellers perspective:

Required:

• Title and Escrow Fees: 50% (split between Seller & Buyer). This includes transfer taxes. Title Insurance, Notary fees, etc…
• Commissions to the Real Estate Agents: Generally 5-6% of the Sales Price.
• Loan Payoff: Your outstanding Mortgage Balances would be satisfied at closing.

Optional:

• Home Warranty
• Property Taxes (prorated)
• Pest or Septic Inspection
• HOA Fees (prorated, if required)

Fees and Charges can be negotiated, and in this Seller’s Market it is wise to do so. I’m always happy to help you improve your bottom line and shift some of the burden to the buyer in the form of a higher final sales price, quicker removal of contingencies and/or requiring a buyer to be cross qualified by my preferred lender. After all the sooner escrow can close the lower your carrying costs will ultimately be. Closing Costs can run between 2-5% of the Sales Price. Knowing this ahead of time and determining how much of this expense you are willing to take on will help in setting your home’s sale price and will ensure that when Escrow closes you’ll feel happy and satisfied with the process and most importantly your bottom line. 

Being focused on these kinds of details is just one of the many strategies that I incorporate into the process of selling your home. My goal isn’t just to sell your home it’s to sell your home for the maximize price that the market will bear while protecting your interests at every turn! Call me today; you have nothing to lose and everything to gain.

Everything You Wanted to Know About a Mortgage, but Were Afraid to Ask

 

 

Everything You Wanted to Know About a Mortgage, but Were Afraid to Ask

What do Lenders Expect when you apply?

• First and foremost your lender will check your credit report; this is where things begin, and where they could end. If you plan to apply for a mortgage, check your own credit report and begin monitoring it for any potential problems. Your goal is to improve your credit worthiness so that your lender will see you as a safe risk and offer you a lower interest rate. Make sure that your report is as accurate as possible and that no one else has access to your credit, possibly hurting your scores. Dispute any inaccuracies with all three credit bureaus to get them cleared up. Also make sure that your credit to debt ratio isn’t too high. Lenders want to see an ability to borrow and pay money, so while it’s not good to have an enormous amount of debt; it is good to have a car loan and a credit card or two so that you can show a history of credit worthiness.

How Is Your Home Loan Repaid?

• Principle: This is the original amount that you borrowed. Typically earlier in the loan’s maturity you pay less towards the principle and more towards the interest. Over time, as the bank recoups its investment, and their expected earnings on your loan, this shifts so that you are paying mostly principle until the loan is fully paid off.  

• Interest: It’s how your lender makes its money, essentially your cost of borrowing their money. Depending on several factors, such as amount you put down, your credit worthiness and income stability your lender will propose a percentage rate that they feel reflects the accurate risk in lending you money. Interest rates are also determined by the current real estate market and the Federal Reserve Bank.

No So Hidden Costs:

• Taxes: Property taxes are paid to your county and may or may not be a part of your loan. You can choose to have what’s called an Impound Account where you pay a monthly amount towards your semiannual property taxes and your lender pays them as they are due. Or if your lender agrees you can opt out of the Impound account and pay your property taxes on your own.

• Home Owners Insurance: Your lender will require that you obtain a Home Insurance policy to protect their investment. If you do not, they can and will purchase a policy and add the cost to your loan.

• Primary Mortgage Insurance (PMI): If you are a high risk borrower (less that 20% down payment, or if you have a low credit score) your lender may require a Primary Mortgage Insurance policy. This type of policy helps guarantee that the lender will get their money back if you are unable to pay for any reason. This policy protects the lender; it would not protect you if you neglect to make your payments.

• Pre-Payment Penalties:  Be sure to cover this with your lender. You may want to pay more towards your principle each month so that you pay off your loan sooner and thus reduce the total interest that you’ve paid. Or you may want to refinance to take advantage of a lower interest rate. Or you may be planning to sell your home in a few years to use your equity to buy your next dream home. These scenarios could all result in an early pay off penalty so they should be considered and discussed with your lender so that you aren’t surprised if you take advantage of any of these options.

Types of Mortgages:

• 30-Year Fixed: This is the most common and popular. With this type of loan you will pay back your lender over a 30 year period at a fixed interest rate. The best times to choose a fixed rate is when interest rates are low or on the rise. Locking in a low rate when it’s available protects you over the term of the loan. This loan is also a good option if you are planning to stay in your home for a long time.

• 15-Year Fixed: There are some significant advantages to a 15-year loan vs. a 30-year term. First they usually carry a lower interest rate. Also, because you are paying interest over 15 years instead of 30 years the total amount that you pay in interest will be reduced. And because you are paying more principle each month you gain equity more quickly. This is a great option if you plan to sell in 5 – 10 years, or if you just want to own your home more quickly!

• Adjustable Rate Mortgages (ARM): Interest rates for this type of loan are adjusted at predetermined intervals to reflect the current market. This can be a benefit if rates are dropping and can be challenging if they are going up. Generally for the first three, five, or seven years the rate will stay fixed. After the predetermined fixed period expires your interest rate will be adjusted up or down on an annual basis according to the current market. An ARM can be a good option if you are buying your home as an investment and plan to sell within a few years because the interest rate during the initial fixed period tends to be lower than the rate would have been for a 30-year fixed loan.

The home loan process can be daunting but with an experienced professional at your side it’s easily conquered. As an agent with many years’ experience in real estate transactions I have built relationships with lenders and can offer support and advice in the process. Don’t let your fear of the unknown stop you from moving forward towards home ownership. Call me today and I can help you begin the process of pre-approval and start looking for your dream home!

Hurry Up!!! Call me so we can get your house listed!!

While it may seem redundant, or almost broken record-esque, it bears repeating... 

Hurry Up!!! Call me so we can get your house listed!!

What's the urgency you might wonder as we are just now entering the hot "Spring Market"? well, so far in 2015 homes sales have outpaced the same time period last year, all while inventory continues to be down.

 

Additionally, pending homes sales, those going into contract, are also on the rise. 

Buyer demand in January was three times higher than last year. Meanwhile current inventory levels in the market are not meeting the demand, this is continuing to maintain a favorable Seller's Market. In a Seller's Market you can expect some great advantages, such as:

• Higher Sales Prices. This means that you can likely command a price in excess of your desired list price, and it certainly puts the negotiating power on our side. 

• Concessions, concessions, concessions... this can often be a sticking point in real estate negotiations, but what if you didn't have to give in, or even bend more than you feel comfortable to accommodate your buyer? Well then this is your market. When Seller's have the power, because buyer demand is high, you don't have to say yes and you are in the position to be able to reject offers that place too high of a demand for concessions.

• The privilege of dominating the transaction.  In a Seller's Market  we can negotiate shorter inspection periods as well as instructing buyers to waive certain contingencies such as loan and/or appraisal contingencies.This allows us to quickly discern qualified buyers from unqualified ones opening the door to accepting a back up offer if we should need to.

These are just a few of the ways that entering the market now can maximize the return on your property investment. As an experienced agent I can guide you through the pluses and minuses of this Seller's Market and perhaps show you advantages that you hadn't thought of or considered. 

However, just as important is my experience as an agent which will put you in a strong position to buy your next dream home, after all it's a Seller's Market, but the right agent can create a win win scenario from both positions. Call me today for a free Market Analysis.