Closing Costs Explained

By Becky Lane | Uncategorized

One question I frequently get asked by buyers is “What the heck are they charging me more money for at closing??” Briefly, these fees are usually between 2-5% of the amount of the mortgage and are primarily fees that your lender is charged by someone else that they so graciously pass on to you. To break it down and explain some of the costs that aren’t always clear, closing costs consist of:

• Loan origination fee – the fee the lender charges you for processing the loan paperwork
• Title fees – fee that’s paid to research the title of a home to make sure there are no unknown liens against it, and the fee that provides insurance to the lender in case something unknown comes up after closing
• Inspection, appraisal, and property survey fees
• Fee for running your credit report
• Recording fee – paid to the county for recording new legal information about a property
• Underwriting fee – paid to the underwriter by the lender for evaluating the strength and risk of the mortgage application

So what can you expect to pay? Well, the best thing to do is to ask for a Good Faith Estimate (GFE) from your lender. This will outline what you can expect in closing costs, and, in some states, your lender can only deviate a certain percentage of the closing costs determined in the GFE.

Once your mortgage is approved by the underwriters and your closing date is set, your lender will give you a copy of your HUD statement within 24 hours of closing. This shows all the fees and costs associated with your mortgage, including the exact amount of the closing costs and the amount of money you will need to bring to closing. You can compare this to your GFE to make sure the HUD costs are legally within the range of what the lender can charge you.

Hopefully, this helps you figure out exactly what you’re getting charged for, and de-mystifies some of the real estate jargon that so often accompanies these kinds of fees!

**I am not a lawyer and this does not constitute legal advice. If you have a legal question, you should consult a real estate attorney.

Credit Counts

By Becky Lane | Uncategorized

Before we get started on the home buying process series of posts, I wanted to address something we haven’t talked about yet – your credit score. Bear with me here, this is a long post. (The TL:DR version is make sure your credit score is accurate and high for the best interest rates.) Your credit score, in case the hundreds of commercials and companies haven’t convinced you, is extremely important. Mortgage lenders use your credit score not as a way to determine if you could afford the monthly payment on a loan, but as a measure of how stable you are financially i.e. how likely you are to default on the loan. And if you have a terrible credit score? Forget it. Even with a substantial down payment (greater than 10%), a high annual income, and significant assets, a lender will probably not even consider you without a credit rating of at least 650. Most companies want to see credit scores above 700, but even in the 700-750 range, you likely be paying higher interest rates than someone who has a 760.

That’s the part that frustrates most buyers – is 760 really that different than 740? No, not really. It probably doesn’t even reflect a different risk to the company – it just puts you into a different bracket on the spreadsheet, and that’s usually how your rates are figured out.

So what negatively affects your credit? Here are some things you should avoid in the year or so before applying for a home loan:

–          Not paying your bills on time. This is a big one. You shouldn’t have any late payments on any accounts in at least the year before applying for a mortgage.

–          Debt to credit ratio. This is confusing to some people – it’s a measure of how much debt you have to how much available credit you have. Let’s say two people each have $10,000 of available credit, but one person has $3000 in debt and the other has $7000 in debt. The second person has a higher debt to credit ratio, which could negatively affect their score moreso than the first person.

–          What kinds of accounts you have. This one can be a little confusing too. Having too many open credit cards can definitely hurt your score, but have a mix of installment loans (student loans, car loans, etc) and a couple rolling credit accounts (credit cards, usually) can actually help your credit score.

–          Recent credit inquiries. As crazy as it sounds, when companies check your credit, it actually hurts your score. It’s best to avoid these credit inquiries (e.g. getting credit for a car, furniture, etc) in the year before applying for a mortgage. This is another one that mortgage companies use as a measure of how financially stable you are – if you’re taking out lots of credit, they may not see you as a financially stable person.

This is why it’s important to make sure you have excellent credit before applying, and the best way to do that is to know exactly what’s on your credit report. The government requires that you get one completely free credit report per year, which you can do at www.annualcreditreport.com. You should make sure that all of the information on your report is accurate, and dispute any inaccurate information. You can dispute anything that doesn’t look right to improve your score as much as possible.

If you have any additional questions, the Federal Reserve is a good resource, as is the Consumer Information section of the Federal Trade Commission website. Hope this helps clear up any questions you might have!

*Full disclosure: I’m not a financial adviser or an attorney, and this is not intended as individual financial or legal advice. This is intended as a summary of information from legitimate sources and is intended only as general information to a wide audience.

Fun projects for your garden!

By Becky Lane | Uncategorized

Since there was such a positive response to my last post where we discussed seed starting and a cool idea for growing herbs, I thought I’d do another post on a couple awesome ideas I’ve seen on Pinterest. I haven’t tried these, so they don’t have the Becky seal of approval, but they look like fun projects around the yard to get started on for the spring/summer. Anything to give me an excuse to get outside and soak up some sun for a while ?

If you’re already thinking, “But Becky, the soil in my yard would never grow veggies” I hear ya! The soil in my yard is mostly sand, and Carl and I are doing pretty good just to grow grass in it. That’s why I’m thinking of building a couple of these:

We get great sun exposure in most of our yard, so I think having a raised bed filled with soil would allow me to actually grow stuff in the ground rather than just in pots. I found a great set of instructions here that details exactly what materials to use and how to assemble them. I’ve also seen this kind of raised bed made with concrete retaining wall blocks if you want something a little easier to put together, but more permanent.

Here is a really cool idea I found on for use in a small space:

This looks like a really cost effective (read: cheap) way to grow veggies or flowers in a small space and keep away common garden pests. I’d love to have a place to put a hanging planter outside my porch. One issue with a hanging system like this is that you would need to plant shallow-rooted veggies or flowers. Off the top of my head, I think lettuce, herbs, strawberries, or short-stemmed flowers would all work really well. In the tutorial, they leave the PVC plain, but I would probably paint my a bright color for some outside eye-candy ?

Hope these ideas inspire you to start planning some fun outside projects for this summer!

Buying a Home: Why it’s important to have Owner’s Title Insurance

By Becky Lane | Uncategorized

If you’re getting ready to buy your first home, or you’re an investor looking for another property, chances are you know all about the loan policy insurance on the home that your mortgage lender requires. This insurance policy protects your lender for the value of the mortgage in case something happens and the lender has to take a loss. BUT, and this is a big, CAPITAL LETTERS “BUT” it does not protect you, the buyer.

When you’re buying a home, there are all sorts of scary, complicated issues that can arise that you may never even consider. Imagine this scenario: you get a mortgage to buy a home, and, thinking you’re covering all your bases, you buy the loan policy insurance your mortgage company requires you to have. Months, or even years, later, you find out your home is in foreclose (BUT  you’ve been paying your mortgage!) and is about to be sold (BUT you’re still living there!). Come to find out, there was a lien on your home prior to closing on your home that you never even knew about, and you’re pretty much out of luck. That original lien supersedes your ownership and, faster than you can blink, your home is no longer yours. Scary, right? Terrifying.

This kind of “fear of the unknown” is exactly what owner’s title insurance protects you from – things like fraud, errors made during past title transfers, unpaid taxes, invalid or unreported divorces by the seller, etc. Generally speaking, this kind of risk is not common when buying a home, but it can happen. Before issuing an owner’s title policy, the title company will do an extremely thorough investigation of the title to disclose any of these limitations that may exist on the title, and will protect you, the buyer, from any of these issues that may come up after you’ve already closed. With a good policy, they will also cover your legal fees if you have to go to court for any issue that relates to the title.

Given the investment and complexity, owner’s title insurance is an easy way to give you peace of mind when buying a home. If you have any questions, you can email me about the various insurances available, and we can talk about how they might relate to the property you’re interested in.

Seller Resources: Why pictures of your home matter

By Becky Lane | Uncategorized

One of the most important things we can do as a team is make sure that the photos I put on your home’s listings are great. See the difference between these two photos:

This doesn’t necessarily mean we have to bring in a $500+ professional photographer, but there are some tricks I’ve learned that we can take advantage of to highlight your home’s best features. Consider 3 things the photo on the right is doing better than the photo of the same room on the left:

• Natural lighting – Believe it or not, you can really tell a difference between pictures taken with a flash vs those taken with good natural lighting. When your home is lit by that gorgeous afternoon sun that comes in the front windows just right, your home will look more open, airy, and inviting. Always a bonus!
• De-cluttering – Sellers get this advice constantly in today’s market to allow their home to make a great in-person impression, but it’s just as important for photos of the home. A tidy, de-cluttered home allows the buyer to see the great space that they could be living in without getting distracted by all of your things that won’t be there when they move in!
• Good angles – This one is a little tricky but really makes a difference. A well-angled photo will make a room look larger and allow a buyer to really get a feel for the space in a room. Something as simple as standing just outside the doorway to get the widest shot possible can really change how a room is perceived on a listing.

In today’s market, it’s important to take advantage of every opportunity we have to show your home and taking great photos is something we can easily work together on to give your home a head start on attracting buyers’ interest!