Category: Home Buying

Home Buying

What to Know About Closing Costs

closing-costs

Buying or selling a home is an enormous personal and financial commitment. While most people focus their attention on the purchase price of the home and mortgage costs, you must also consider other fees and costs. Whether you’re a first-time home buyer or a seasoned real estate veteran, closing costs are one of the most significant expenses you should consider. There are several different types of closing costs, which could cost a buyer or seller thousands of dollars.

Real Estate Taxes

Property taxes are a significant closing cost. Depending on where you live, real estate taxes could be paid in arrears, or a year late. Because of this, the seller of the home will have to credit the buyer a portion of the year’s property taxes at the closing of the sale. Depending on the time of the year, this could be a considerable amount of money paid to the buyer at closing.

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Mortgage Costs

Home buyers will also incur a lot of closing costs if they take out a mortgage. There are several different types of mortgage-related closing costs to consider, including appraisals, property inspection reports, mortgage points, and loan origination fees. These are typically at least $1,000, but could easily be much more than that depending on the structure of the loan.

Transfer Taxes

Transfer taxes are fees that are paid to the state, county, or city at the closing of the sale. These charges constitute around 1% of the selling price and could be paid by either the buyer or the seller at the close, depending on the area’s regulations.

Real Estate Commissions

When buying or selling a home, most people choose to be represented by a realtor. Since real estate agents are paid entirely on commission, this can equal a big fee due at the closing of the sale. In most cases, the seller of the property will be required to pay for the commission for both the buyer and seller real estate agent. In most cases, these fees equal up to 5 to 7% of the total sales price.

Request a Statement

Since closing costs are expensive, it is important that you have a full understanding of what they will be before the closing date. Both the buyer and the seller of the home should be able to get an estimated closing statement a couple of weeks before the closing date. This report will help to eliminate the risk of any cost surprises that can show up before closing.

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Negotiating Closing Costs

While closing costs can be expensive, there are a lot of different ways to settle them. Homebuyers can negotiate either directly with the seller or with their lender. It is very common for a homebuyer to request a certain dollar or percentage credit from the seller to cover a portion of closing costs. They may also be able to negotiate reduced fees with their lender.

A seller of the home could potentially negotiate closing costs as well. One of the best ways to do this would be to negotiate a lower real estate commission with a realtor. If the home has a high sales price, a broker may be willing to offer a lower fee to win the deal.

Home Buying

7 Things a First-Time Home Owners Should Know Before Buying

buying-a-first-house

Buying your first home is one of the most exciting and satisfying moments of your life. Turning the key for the first time in the door of the home you now own is a moment unlike any other, and it’s worth experiencing when you can afford to make a move. Before you start the home-buying process, however, there are a few things you should know that will only make the process easier and less stressful for you.

1. Start With Your Credit Report

Don’t even think about buying a home before you check your credit report. Even if you have an excellent credit history, your report might not reflect that. Mistakes happen all the time, and your information might be incorrectly recorded. Your rate, your ability to buy a home, and what you can afford to spend might be greatly affected by even the smallest mistake on your report.

2. Get the Pre-Approval

The truth is all buyers should get pre-approved for a mortgage before buying a home. Many sellers won’t accept offers without a pre-approval, and it helps you know what you can afford to spend. Your idea of affordable and the bank’s idea of affordable for your budget might be significantly different.

Getting pre-approved for a mortgage is an important first step, especially in a competitive housing market.
Getting pre-approved for a mortgage is an important first step, especially in a competitive housing market.

3. Calculate Other Expenses

It’s a mistake to assume your mortgage should be as much as you can afford to spend. You must take into account the other costs associated with homeownership before figuring what you can afford.  Figure taxes, insurance, home maintenance, homeowner association fees, and household emergencies into the affordability of a new home before shopping.

4. Down Payments are Necessary

There are many options for buyers without a down payment, but it’s not recommended you go with one. It’s better to apply for a mortgage with at least 20% down so you can get a mortgage without Private Mortgage Insurance. PMI is an expensive addition to your monthly expenses, and it might mean buying a smaller, more affordable home to fit the payment into your monthly budget. A down payment can eliminate the need to pay PMI.

5. Find the Right Realtor

If you find the right Realtor, the process of buying a new home is made simple and efficient. Working with someone you don’t like, don’t mesh well with, or can’t seem to agree with can make homebuying stressful. The right realtor can find the home of your dreams by working hard and listening to you.

6. Learn to Compromise

You won’t find the exact house you’re dreaming of unless you choose to build as an option, so now is a good time to realize you’ll need to make some sacrifices and compromises when selecting your dream home during the buying process. Sit down and make a list of what’s most important to you in order of importance, so you know where you’re willing to compromise.

Realize your first house purchase may not be your dream home.
Realize your first house purchase may not be your dream home.

7. It Doesn’t Happen Overnight

You might find the house of your dreams on day one, or it might take you months to find it. The offer might not be accepted; it might be declined, someone else might get the house before you. The inspection could come back with bad news. The house might not appraise for the asking price. The seller might back out. You might find a home you love even more. There could be a problem with financing. The process is lengthy, so sit back and prepare to spend some time dealing with it. Knowing to expect the unexpected isn’t exactly enjoyable, but it’s easier to deal with than expecting the process to be seamless.

Your home buying experience doesn’t have to be a nightmare. You can apply these tips and tricks to the process to help it move along smoothly, but know that buying a home is both exciting and stressful. There’s no easy to way to get through the process without experiencing both emotions regularly. With Papillon Real Estate by your side, we’ll help you navigate the home buying process so you can close sooner and move into your Miami home more quickly.