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Buying or selling a house is an exciting and sometimes confusing experience that includes expenses called “closing costs” that can often catch us by surprise. Closing costs are simply the fees and expenses incurred by buyers and sellers during a real estate transaction’s closing or settlement process. 

Typical closing costs can vary depending on what is customary in an area, the mortgage type, property value, and other factors.  The largest expenses can be the real estate commission and the title policy.  Total closing costs for a buyer can characteristically range from 2% – 5%  of the sales price and 4% – 7% for a seller.

The most common buyer’s closing costs include loan origination fee, title insurance, attorney fees, appraisal, homeowner’s insurance, underwriting, miscellaneous fees associated with a new mortgage, and prepaid interest to the end of the month.

Interest is paid in arrears on mortgages after the borrower has used the money.  The payment due on the first of the month pays the interest for the previous month and is calculated for a full month.  The prepaid interest covers the time from the closing date to the end of that month.  The borrower’s first payment will usually not be the first of the month following the closing date but the next one.

Separate from the closing costs, lenders usually itemize the additional fees collected at closing used to pre-pay portions of the property taxes and insurance to establish the escrow account.  Insurance is always purchased annually in advance which would be due at closing.

The seller will owe the taxes from January 1^st to the closing date, and it will generally show as a credit to the buyer if they haven’t been paid to the taxing authority for the year yet.  Lenders generally like to have two months of funds for the annual insurance and taxes so they can be paid or renewed before it is due.

Some expenses are paid outside of closing like the inspection fees that would be due to the provider at the time they are made.

While both buyers and sellers are responsible for paying certain closing costs, it is possible for a buyer to negotiate for a seller to pay part or all their closing costs.  VA loans restrict the buyer from paying certain fees and they become the responsibility of the seller.  Such fees include attorney fees, agent fees, escrow fees to establish the account, rate lock fees, appraisal fees or inspections ordered by the lender.

The actual expenses will be determined by the lender and special provisions in the sales contract. Your agent can supply you with an estimate of closing costs you typically will be responsible for at the beginning of the transaction and again at the time the sales contract is written.  Buyers will receive an estimate from their lender at the time of application.

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Your home is not just a place to live; it’s a valuable asset that can serve as a financial resource when you need it most. One of the significant advantages of homeownership is the opportunity to build equity over time, which can be accessed in various ways to fund life’s important milestones or unexpected expenses.

Whether you’re looking to undertake a home improvement project, consolidate debt, cover education expenses, or simply ensure financial flexibility for the future, your home equity can be a powerful tool to achieve your goals. By understanding the options available and the implications of each, you can leverage your home’s value to enhance your financial well-being and seize opportunities that come your way.

Home Equity Loans are a fixed amount loan using the equity in the home as collateral. The borrower receives a lump sum and pays it back in regular monthly installments over a fixed term, typically at a fixed interest rate.

A Home Equity Line of Credit is similar to a credit card; a HELOC provides a revolving line of credit using the home’s equity as collateral. Homeowners can borrow as much or as little as they need up to a specified limit, and interest is only paid on the amount borrowed.

 A Cash-Out Refinance involves refinancing the current mortgage for more than the homeowner owes and pocketing the difference. Essentially, homeowners replace their existing mortgage with a new, larger loan and get the difference in cash to be used any way they want.

A Reverse Mortgage is available to seniors, typically 62 and older and allows homeowners to convert part of their home equity into cash without having to sell their home or pay additional monthly bills. Instead of making monthly payments to a lender, the lender makes payments to the borrower.

Homeowners can choose to sell their current property and purchase a less expensive one, using the profit from the sale (equity) for other purposes. This is a more drastic approach as it involves moving, but it can release a significant amount of equity.

Each of these options has its own advantages and considerations, so homeowners should carefully evaluate which method best fits their needs and consult with financial professionals before making decisions.

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Buying a home is a big decision, and there are a lot of things to consider. One important factor to consider is the home’s claim history. A home’s claim history can tell you a lot about the property, including its potential risks and liabilities.

To identify potential risks because a home with a history of claims may be more likely to experience future claims. This could be due to the location of the home, the age of the home, or the materials used in construction.

The cost of insurance can be higher for homes with a history of claims. Insurance companies factor in the risk of future claims when setting premiums.

You may be able to negotiate a lower price if you discover the home has a history of claims. This is because the seller may be motivated to sell the home quickly to avoid future claims.

The Comprehensive Loss Underwriting Exchange (CLUE) is a database that tracks insurance claims filed on homes.  A CLUE report can be purchased for a fee, and it will show you the number and type of claims that have been filed on the property within the last seven years.  

Sellers are entitled to one free copy of their LexisNexis CLUE report each year; there is a nominal fee for additional, original reports.  Contact LexisNexis by calling 888-497-0011 or by emailing consumer.documents@lexisnexisrisk.com.  As a potential buyer, your agent can request a copy of the report from the listing agent who may have to ask the seller to order it themselves, if they haven’t done so recently.

Another option is to instruct your home inspector to look for signs of damage that may have been caused by previous claims.

Checking the claim history of a home is an important part of due diligence in the home buying process.  It is important to remember that the claim history is not a perfect predictor of the future. Just because a home has had claims in the past does not mean that it will have claims in the future. However, the claim history can give you valuable information that can help you make an informed decision about whether to buy the home.

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Homebuyers in the market who are frustrated by the low inventory are finding what they want in new construction.  Among the obvious advantages are that it is fresh and new, has never been lived in, and can be personalized to an individual’s taste and needs.

New construction homes can be more expensive upfront, but they can save you money in the long run. These homes are built to the latest building codes, which means they are more energy-efficient and require less maintenance. They also come with warranties that can help protect you from unexpected repairs.

New construction homes can be a great option for first-time homebuyers. They offer a blank slate that you can customize to your liking, and they don’t have the same wear and tear as older homes.

Working with a REALTOR® can help you navigate the process of buying a new construction home. They can help you find the right builder, negotiate a good price, and make sure that the home is built to your specifications.

One of the most critical steps in designing your dream home is enlisting the expertise of a qualified real estate professional. A REALTOR® brings essential knowledge of the local market, construction processes, checklists, and negotiation skills. They can help you explore financing options, connect you with reputable builders and guide you through the complex steps of purchasing new construction.

Navigate the path to your dream home with these steps guided by your REALTOR®:

1. Select a Real Estate Professional: Find a trusted agent to champion your interests, negotiate with builders and ensure a seamless transaction.
2. Research Builders and Neighborhoods: Discover builders, track records and neighborhoods using the expertise of your real estate professional.
3. Get Pre-approved: Determine your budget and financing options by securing pre-approval from a trusted lender.
4. Navigating Legal and Documentation Processes: Your real estate professional understands local regulations, permits and zoning requirements. They will guide you through the paperwork and review things along the way, allowing you to focus on the creative aspects of your dream home.
5. Construction and Project Management: Your real estate professional will accompany you through the construction process. Your agent will work with the builder’s agent to oversee the timeline and progress, to address any concerns that may arise.

An important step is having your agent introduce you to the builder’s home for the first time and register you as their client.  Builders have sales teams that will assist you, but they don’t represent you; they are employees of the builders.

Another consideration is to have a home inspection, even though it may not seem necessary.  It is comforting to have your inspector verifying that the building is up to code and being done the way it should be.  Some buyers elect to have inspections done at the major steps of the building process, but this does add some additional cost.

The importance of having a REALTOR® by your side is part of your investment in a home.  Your agent will be with you every step of the way and advocate for you in the process.  Your path to home-sweet-home starts with selecting your agent.

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Imagine you’re on the verge of securing a mortgage, and a slightly higher credit score could mean a lower interest rate. The good news? There’s a quicker way to make that possibility a reality. Mortgage loans are often more time-sensitive than other loans. If you find yourself in a situation where a slightly improved credit score could open doors to better rates, the solution might lie in rapid rescoring.

When it comes to mortgage loans, time is of the essence. Your offer has been accepted, and you have a limited window to qualify for a new loan. But what if there was a way to boost your credit score swiftly and improve your chances of securing a lower interest rate?

Enter rapid rescoring … a powerful tool that mortgage lenders use to diagnose potential actions that could lead to a credit score increase. It’s important to note that these diagnostic reports are estimates, and their accuracy can vary since different lenders employ distinct scoring formulas. However, this innovative approach can provide a viable solution for improving your credit score in a time-sensitive scenario.

Let’s say you realize you have sufficient funds in your savings account to significantly pay down your credit card debt. Acting on your mortgage officer’s advice, you make the payment, anticipating a positive impact on your credit score. This strategic step is a prime example of how you can proactively influence your credit standing.

Following your payment, your lender can initiate a rapid rescore by obtaining an updated copy of your credit report from one or more of the three nationwide consumer reporting agencies … Equifax, TransUnion, and Experian. With this fresh data in hand, your lender can reevaluate your credit scores based on the latest information, including your substantial debt payment aimed at elevating your scores.

Rapid rescoring is designed to be swift, typically taking three to five business days to complete. The exact duration may vary depending on your individual circumstances, but the benefits can be significant.

Before requesting your lender to initiate a rapid rescore, it’s prudent to evaluate your entire financial situation. Ensure there are no unforeseen negative developments on the horizon, such as new delinquent payments or other potential issues that could affect your credit.

If you find yourself in a credit score range where a few extra points could unlock better terms for your mortgage, rapid rescoring could be an excellent option to explore.

In the intricate world of mortgage loans, rapid rescoring emerges as a valuable strategy for potential homebuyers aiming to secure favorable terms. By understanding the potential of rapid rescoring and acting strategically, you can potentially save time and even money in the long run. When considering this option, remember to assess your entire financial landscape and consult with a trusted mortgage professional to make an informed decision that aligns with your goals.

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Moving can be stressful enough without having to worry about being scammed by a moving company. Unfortunately, there are unscrupulous movers out there who prey on people who are in the midst of moving.

To protect yourself from being scammed, it’s important to be aware of the red flags. Here are a few things to watch out for:

The mover or broker doesn’t perform an on-site inspection of your household items and gives an estimate over the telephone or online. A legitimate moving company will always come to your home to inspect your belongings and give you an accurate estimate.

The mover or broker doesn’t provide a written estimate or says they will determine the cost after loading. A written estimate is essential to protect yourself from hidden charges.

The moving company demands cash or a large deposit before the move. Legitimate moving companies will accept credit cards or checks.

The mover asks you to sign blank documents. Never sign blank documents. This could give the mover the opportunity to add hidden charges after the move.

The mover or broker doesn’t provide you with a copy of the Your Rights and Responsibilities When You Move booklet and a copy of FMCSA’s Ready to Move brochure. These booklets contain important information about your rights and responsibilities as a mover.

The company’s website has no local address and no information about their registration or insurance. A legitimate moving company will have a physical address and be registered with the Federal Motor Carrier Safety Administration (FMCSA).

The mover claims all goods are covered by their insurance. This is not always true. Make sure you understand the terms of the mover’s insurance before you sign any contracts.

On moving day, a rental truck arrives rather than a company-owned or marked fleet truck. This is a red flag that the mover may not be legitimate.

The mover claims that you have more belongings than estimated. This could be an attempt to charge you more money.

If you see any of these red flags, it’s best to walk away from the moving company and find a more reputable one. You can check the FMCSA’s website to see if the company is registered and insured. You can also read reviews of the company online.

For more information, go to the Federal Motor Carrier Safety Administration website.   Download our Moving Guide.

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A showing is an opportunity for a buyer to determine if a home is right for them. Each of the different types of showing plays a valid and necessary role in marketing the home. Some buyers may start by looking at homes online, which can lead them to drive by the home to see if it still meets their interest before they schedule a showing.

Online showing: This is when a buyer looks at a home’s listing online, including photos, videos, and a description. This can be a great way for buyers to get a general overview of a home and see if it is worth scheduling a showing.

Drive-by showing: This is when a buyer drives by a home to see it in person. This can be a good way for buyers to get a feel for the neighborhood and the surrounding area. It can also be helpful for buyers to see the home’s size and layout from the outside.

In-person showing: This is when a buyer schedules a time to visit the home with a real estate agent. This is the best way for buyers to get a true sense of the home and see if it is right for them. Buyers can ask the real estate agent questions about the home and the neighborhood. They can also walk through the home and get a feel for the space.

Virtual Showing: Virtual Reality (VR) can be used to stage, remodel, or update a home for sale by creating realistic images of what the home could look like with different furniture, appliances, paint colors, countertops, or flooring.  By creating images of the home in different staging scenarios, the agent can show potential buyers the potential of the home and how it could be used.

Each one of these types of showings contributes to the marketing of a home.  By offering different types of showings, a seller can reach a wider audience of potential buyers and increase the chances of selling their home quickly.

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Homeowners who are facing financial difficulty are often targeted by mortgage relief scams. These scams can be very convincing, and homeowners may be desperate for help, making them vulnerable to these schemes.

Scammers often pose as government officials or mortgage experts, and they may promise homeowners that they can help them avoid foreclosure or modify their mortgage loan. However, these promises are often false, and homeowners who fall victim to these scams may lose their homes and their money.

If you are facing financial difficulty and you are considering a mortgage relief program, it is important to do your research and be very careful. Here are some tips to help you avoid becoming a victim of a mortgage relief scam:

• Only work with a HUD-approved housing counselor. You can find a housing counselor by calling 1-888-995-HOPE (4673).
• Be wary of anyone who promises to help you avoid foreclosure or modify your mortgage loan for a fee. It is illegal for anyone other than a licensed attorney to charge a homeowner a pre-paid fee to negotiate a mortgage modification on the homeowner’s behalf.
• Read all paperwork carefully before signing anything. Do not sign anything that you do not understand.
• Do not be pressured into making a decision quickly. Take your time and do your research before making any decisions about your mortgage.

The warning signs for fraudulent mortgage rescue schemes:

• You are charged an upfront fee for assistance in avoiding foreclosure or modifying your mortgage loan.
• You are asked to transfer the deed to your home. It is very unlikely you will ever get the deed back, regardless of what you are told.
• The individual or company “helping” you asks you to make future mortgage payments directly to them, instead of paying your mortgage company directly. This is a common tactic used by scammers to take your money and run.
• You are asked not to contact your current mortgage company. This is another common tactic used by scammers to prevent you from getting help from a legitimate source.
• The scammer refuses to provide you with a written plan or contract, or alternatively pressures you to quickly sign documents you do not understand. This is a red flag that the scammer is not interested in helping you, but rather is trying to take advantage of you.

Review this HUD guide for homeowners having difficulty making mortgage payments. This guide provides information on your rights and options if you are facing foreclosure.

If you think you may have been a victim of a mortgage relief scam, you should contact your state attorney general’s office or the Federal Trade Commission (FTC). You can also file a complaint with the FTC online at ftc.gov/complaint.

It is important to be aware of the red flags for fraudulent mortgage rescue schemes. If you are contacted by someone who claims to be able to help you avoid foreclosure or modify your mortgage loan, be sure to do your research and ask questions before you hand over any money.

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Buying or selling a home is a big adventure; some thrill seekers may choose to take on both tasks at the same time. If you’re finding yourself in the position of needing to buy and sell at the same time, here are some tips to help you navigate the possibly challenging course ahead of you.

Evaluate Your Local Market

For most buyers and sellers, selling their current home before putting an offer on another property is their best real estate option. But for others, it really depends on the local real estate market. If you’re thinking of selling and buying at the same time, research the market in your target area. This can help you gauge whether it’s a buyer or seller market. If many properties are available, it might be a good time to list. If inventory is low, you may need to wait until the market picks up again.

The general rule of thumb is to sell first in a buyer’s market and buy first in a seller’s market; but this isn’t always the case since every experience is unique. You can really get an understanding of what might work best for you by talking to your trusted real estate agent; they will know the market and will be able to provide insight into current trends.

Understand Your Finances

When it comes to buying or selling a house, finances are a huge part of both transactions. Whether you are looking to sell or looking to buy, knowing your current financial situation is vital to your next steps.

If you have a mortgage loan, you will absolutely want to know how much equity you have in your home. The equity that has built up could be enough for a down payment on another home. It’s important to remember, though, that any equity is only accessible after closing unless you use a home equity line of credit (HELOC) or a second mortgage to cash out.

If you currently own, consider having an inspection done to understand what repairs or work may need to be done to the property to help you understand how much you may need to deduct from the possible sale price or any concessions you may need to make for a future buyer.

Utilize A Contingency

Ideally, you would sell your home on the same day as buying a new one. Since this is not the case for most buyers/sellers, adding a contingency into the contract can be helpful. In a real estate transaction, a contingency refers to a provision for a possible event or circumstance when it comes to the financial ability to close a purchase sale.

If you want to buy before selling, make an offer contingent on the sale of your home, which means you will buy the new home once your current residence sells. You can also request an extended closing (if you are certain your home will sell), which extends your closing past the typical standard of 30-45 days.

If you want to sell before buying, you can make an offer with a settlement contingency. This contingency works when you have an offer on your home, and you want to buy another which means you will buy the home contingent on the sale of your existing home.

If you happen to sell and haven’t made an offer on another home, you may be able to negotiate a rent-back, which means you go through with the sale of your home, but you rent the home back from the new owners for a specific time (anywhere from 60-90 days), giving you time to find a new home or make other living arrangements.

In low inventory markets, sellers are reluctant to accept contingencies because there are more buyers than properties for sale.  Competing in this kind of market, some buyers resist adding a contingency on the sale of a home.

Buying and selling are big events – if you are unsure of where to start or if you should do both at the same time, it is best to ask for help. Ensure your finances are up-to-date and have a reasonable idea of what you can get for your home. If you must search for another home while selling, have a backup plan if you can’t find another home in time. Your real estate professional can provide insight into the market and what other buyers and sellers have encountered.

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With new mortgage rates approaching 8%, many buyers have decided to wait for rates to come down.  While there may be some easing in the fourth quarter of 2023 and 2024, assuming an existing FHA mortgage with a lower rate made in the last three or four years might be a much better alternative.

Since December 1, 1986, FHA has had the right to approve the purchaser of an existing FHA loan.  Prior to that, anyone, regardless of credit worthiness or other qualifications, could assume an existing FHA loan. 

Existing FHA mortgages are assumable at the current interest rate for owner-occupied buyers.  The benefit is that the rate could be much lower than a new current mortgage.  The borrower must qualify for the loan under current FHA underwriting guidelines, but it will be easier because the payment will be lower due to a lower assumable mortgage rate.

The buyer’s closing costs on an assumption are less than a new FHA loan because an appraisal and survey are not required.  The transfer fee is $500 instead of the 1% loan origination on a new loan.

An existing mortgage is further into the amortization schedule than originating a new loan which means there is more being applied to the principal each month accelerating the payoff.  Another benefit is that lower interest rate loans amortize quicker than higher interest rates loans.

It will generally take a larger initial cash investment on an assumption to buy the equity than buyers were planning to use as a down payment.  Secondary financing can be used for the difference which is referred to as the assumption gap.  Purchase Price less Existing Balance on Mortgage = Equity less Planned Down Payment = Assumption Gap.

The difficulty is that lending institutions are slow to add second mortgages to their offerings. Another reality is that lenders make much more money on a new loan than an assumption. Alternative sources for the second loan could be the seller, relatives, credit unions, local banks, and hard money lenders.

Conventional loans have had a “due on sale” clause in their loan documents since the early 1980s which not only require the borrower to qualify for the assumption but allows them to escalate the interest rate to the current rate.  For practical reasons, there is no benefit to assuming a conventional loan; the borrower might as well get a new conventional mortgage.

Buyers who assume an FHA mortgage without obtaining lender approval risk triggering the due-on-sale clause.

Lenders must grant a release of liability to the original borrower (seller) if the assumptor (buyer) is approved and agrees to execute a statement to assume and pay the mortgage debt.

The practical difficulty in finding assumable FHA loans is that there is no searchable field in most MLS databases and anything identifying it as an assumable mortgage is limited to the description or the agent comments.

Another issue is that many agents have never done an assumption and, in some cases, are not even aware that FHA mortgages are assumable at the original mortgage rate.  An experienced agent can show you the savings on an assumption compared to a new mortgage at current interest rates and knows how to locate assumable loans.

If you’re interested in learning more about it, find an agent familiar with FHA, VA, & USDA assumptions.  Each type of mortgage has slightly different requirements, but each is assumable.

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