What are Closing Costs?
Are you surprised that closing costs are also included in a mortgage and the down payment? What are these? How much are they? Can you reduce them?
Closing costs are the fees you refund a lender for processing the closing of your mortgage loan. As financial companies pay many entities to assess the property and your finances. They may sum up to 2% to 6% of the home’s sale price. And yes, there are ways to reduce them.
Private Mortgage Insurance 101
Homebuyers worry about paying private mortgage insurance (PMI), which is another concern in addition to the down payment and closing costs.
Lenders who offer conventional loans need PMI if your down payment is less than 20%. Financial institutions that provide government-backed mortgages ask for insurance too.
What is a Down Payment?
If you have finally considered applying for a mortgage loan, you may have heard of the word down payment. What does it mean? How much do you have to pay?
A down payment is a percentage of a home’s sale price you need to pay upfront. Mortgage lenders need this before they lend you the remaining cost of a house to buy it.
Let’s say, you are looking at a house worth $200,000 in cash. A mortgage lender pays whatever’s left after you settle the down payment of up to $40,000 so you can buy the house.
Unfortunately, $40,000 is a lot of money for many people. That is why down payment assistance (DPA) programs exist to help homebuyers afford it.
.png){kind=logo}