A good step to take before you start planning on buying a house is to get a good idea of your monthly payments will be. You can figure out what payment you are comfortable with, and then can see what price range of home you'll be looking at.
As a general rule the total payment including taxes and insurance will be just under 1% of the sales price. There are a couple things to keep in mind though.
First, this is just a rough estimate. Interest rate, insurance and property taxes are all variables. So please use it as a general guideline, not an exact calculator.
Second, the further that you move higher than $150,000 the rule becomes less and less than 1%. For example, at $150,000 the payment may be $1400, but for a $400,000 house the payment would be $3200.
Third, this is assuming a down payment of 5%. A larger down payment will lower the payment further.
Fourth, this is not for condos. Condos will be a little more because of HOA dues.
If you want to calculate an actual payment, please go to my mortgage calculator on my website www.america-lending.com.
Hope that helps!
Monday, November 24, 2008
Monday, November 17, 2008
Escrow accounts
Escrow accounts are accounts that lenders set up to recieve payments from borrowers to use to pay property taxes and homeowners insurance. In this way a borrower can send in 1/12 of the yearly tax and insurance bill each month instead of coming up with the full amount at the end of the year.
When you put down less than 20% as a down payment, the lender will require you to have escrow accounts. The lender wants the escrow accounts as they can be sure the taxes and insurance are paid on time. They also collect interest on the money.
If you put down at least 20% (or get a second loan so your first LTV (Loan To Value) ratio is less than 80% of the price) you can elect to waive the escrow accounts. Since the lender doesn't get to collect interest on that money any more they charge a fee, usually 0.25% of the loan amount.
At closing lenders also collect 3 months worth of taxes and insurance as a buffer against rising taxes and insurance. They are regulated by the Federal government on how much they can hold in escrow. So if your taxes drop, you should receive a partial refund from the lender. Conversely if they go up, your escrow payments will increase.
For most borrowers escrow accounts are a good idea as the payments are spread throughout the year and it's easier to let the lender handle it. However, for some it's preferable to pay the fee so that they can make interest on their own money.
I'd be happy to look at any loan scenario you may have. Just email me billconover@america-lending.com.
When you put down less than 20% as a down payment, the lender will require you to have escrow accounts. The lender wants the escrow accounts as they can be sure the taxes and insurance are paid on time. They also collect interest on the money.
If you put down at least 20% (or get a second loan so your first LTV (Loan To Value) ratio is less than 80% of the price) you can elect to waive the escrow accounts. Since the lender doesn't get to collect interest on that money any more they charge a fee, usually 0.25% of the loan amount.
At closing lenders also collect 3 months worth of taxes and insurance as a buffer against rising taxes and insurance. They are regulated by the Federal government on how much they can hold in escrow. So if your taxes drop, you should receive a partial refund from the lender. Conversely if they go up, your escrow payments will increase.
For most borrowers escrow accounts are a good idea as the payments are spread throughout the year and it's easier to let the lender handle it. However, for some it's preferable to pay the fee so that they can make interest on their own money.
I'd be happy to look at any loan scenario you may have. Just email me billconover@america-lending.com.
Sunday, November 2, 2008
Closing Costs, how much are they?
As equally important as interest rate is closing costs when choosing your mortgage loan. Closing costs are different for each lender and the amount is inversely related to interest rate. So the higher your closing costs, the lower your rate and vice versa.
Closing costs can be broken down into two categories: lender fees and third party fees. Lender fees are those that are charged by the lender and therefore the lender has control over these fees. It's very helpful to know this when comparing loans from different lenders. Lenders have to assume what the third party fees are and their assumptions are not always the same. So to compare use lender fees and rate and take out third party fees. Third party fees will be the same independent of the lender you use.
I'll start with lender fees. There is typically an Underwriting fee, a Processing fee, a Tax Service fee, a Document Prep or Attorney fee, and an Application fee. These fees vary from lender to lender but here are there rough ranges. UW fees are $400 to $700, Processing is $350 to $550, Tax service is around $100, Doc Prep from $85 to $350 and Application is $250 to $450. A lot of times the Application fee will cover the appraisal and credit report.
So expect between $1,200 and $2,000. Of course the lender can work these into the rate if they wish, please see my previous post for more info.
Third party fees include: Title policy, Title Escrow fee, Survey, Recording Fees, and HOA transfer fees. The owner's title policy is paid by the seller in Texas, but the buyer is responsible for paying for the Lender's title policy to cover their interest in the property. This is usually $100 to $250. The Escrow fee is charged by the title company to handle the transaction and is $200 to $400. Surveys are $440, but many times the seller will already have one that you can use for free. Recording fees are $150 or so. HOA fees are $200 to $600, this is only applicable if the property has a Home Owner's Association.
On average you're looking at about $650 if there is an existing survey and there is no HOA.
The total of all closing costs will then be between $2000 and $3000. There are also items that you pre-pay at closing, called you guessed it "pre-paids". Items such as interest, insurance and taxes. I'll cover that in a post later, so please check back next month.
Closing costs can be broken down into two categories: lender fees and third party fees. Lender fees are those that are charged by the lender and therefore the lender has control over these fees. It's very helpful to know this when comparing loans from different lenders. Lenders have to assume what the third party fees are and their assumptions are not always the same. So to compare use lender fees and rate and take out third party fees. Third party fees will be the same independent of the lender you use.
I'll start with lender fees. There is typically an Underwriting fee, a Processing fee, a Tax Service fee, a Document Prep or Attorney fee, and an Application fee. These fees vary from lender to lender but here are there rough ranges. UW fees are $400 to $700, Processing is $350 to $550, Tax service is around $100, Doc Prep from $85 to $350 and Application is $250 to $450. A lot of times the Application fee will cover the appraisal and credit report.
So expect between $1,200 and $2,000. Of course the lender can work these into the rate if they wish, please see my previous post for more info.
Third party fees include: Title policy, Title Escrow fee, Survey, Recording Fees, and HOA transfer fees. The owner's title policy is paid by the seller in Texas, but the buyer is responsible for paying for the Lender's title policy to cover their interest in the property. This is usually $100 to $250. The Escrow fee is charged by the title company to handle the transaction and is $200 to $400. Surveys are $440, but many times the seller will already have one that you can use for free. Recording fees are $150 or so. HOA fees are $200 to $600, this is only applicable if the property has a Home Owner's Association.
On average you're looking at about $650 if there is an existing survey and there is no HOA.
The total of all closing costs will then be between $2000 and $3000. There are also items that you pre-pay at closing, called you guessed it "pre-paids". Items such as interest, insurance and taxes. I'll cover that in a post later, so please check back next month.
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