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Homebuyer FAQs: Mortgage and Closing Costs

What You Need to Know about Mortgage & Closing Costs

Whether you are a first-time homebuyer or a seasoned homeowner ready for your next home, it is important to understand mortgage and closing costs. Here are some frequently asked questions to help you better understand your options.

Buying a Home: Homebuyer FAQs re Mortgage Costs and Closing CostsQ:  What factors impact a mortgage interest rate?

A:  There are many factors involved when determining a homebuyer’s interest rate including credit score, loan type, home price, down payment and mortgage costs (for example, points, mortgage insurance and closing costs).

Q:  What other credit-related factors are important when financing a home?

A:  The better your credit, the lower your interest rate for a home loan is likely to be. Mortgage lenders consider your overall credit score, but they also consider your credit history with them, the amount of debt you already have, how much money you have in savings, your total assets and your current income. Learn more about credit reports and scores here.

Q:  What are points?

A:  Also called discount points, points lower your interest rate in exchange for a fee paid at closing. When you choose to pay points, you pay more at closing, but you lower your interest rate and pay less for the home over time. Points are related to the loan amount, and one point equals 1 percent of the loan amount. For example, on a $200,000 mortgage loan, 1 percent of the loan amount would be $2,000. Points are listed on your loan estimate and on the closing disclosure.

Q:  What is mortgage insurance?

A:  Many lenders require mortgage insurance for borrowers who put less than 20 percent down on the purchase of a home. The mortgage insurance lowers the risk to the lender, making it easier for you to qualify for a home loan. The cost of the mortgage insurance is included in your monthly mortgage payment, increasing your monthly mortgage payment. The cost of private mortgage rates varies depending on the borrower’s down payment and credit score.

Q:  What closing costs will I have to pay?

A:  Closings costs, the amount of money you’ll need to pay when you close on the purchase of your home, vary. Sometimes these costs are paid out of pocket, but some lenders will roll these costs into the total loan amount of your mortgage. Certain closing costs may also be negotiated with the home seller and the home seller’s agent. Common closing costs include appraisal fees, title insurance, government taxes, tax service provider fees, and prepaid expenses (for example, property taxes, homeowner’s insurance and interest between the time of closing and the time your first payment is due).

For more information on interest rates, credit, points, mortgage insurance, closing costs and more, download this free home loan toolkit offered by the Consumer Financial Protection Bureau. It has some great information and checklists to help you through the home buying process. An experienced Realtor® can also answer these questions and guide you as you make decisions about buying a home.

Good luck!

Sources: Consumer Financial Protection Bureau

5 Ways to Increase Your Home’s Value Before Selling

5 ways to increase your home's value before sellingRenovations can make your home worth more, and if you’re planning to make any changes, here are some tips to improve your home while saving money:

  1. Tackle one room at a time. It will make it easier on you, and you won’t have to stress about keeping pets or little ones out of multiple rooms at a time. It will also be less costly because there is less going on, and fewer people (contractors, subcontractors, etc.) coming in and out of your house at one time.
  2. The kitchen is your home’s money maker and a good selling point. Replace your appliances if you can; it adds instant value if you have a new stovetop, oven or refrigerator. Reface your cabinets and replace your countertops if you can afford to. They’ll give an older kitchen new life. Consider ways to optimize the space or expand it.
  3. Change the bathroom. Bathrooms are another huge selling point. Upgrade your bathtub; make it bigger if you can. Install a shower with a moveable showerhead, or a rain showerhead. Change out overhead lighting for wall mounts to add warmth to the bathroom. Heated floors are also a big bonus. A small change that can have a big impact is adding new grout, making the bathroom look cleaner without spending a lot of money.
  4. Revitalize a room with a new paint color. If your home has bold colors, consider repainting with more neutral colors. They’re sometimes more appealing and help would-be buyers picture themselves in your home with their own décor.
  5. Add storage in the garage. While this is a relatively easy fix, it can add a lot of value and convenience for prospective buyers.

Remember that a more expensive project may not add more value. Swimming pools, for example, are costly to maintain. Instead, make minor changes to add value without a lot of expense or hassle.