What is up with people demanding closing costs??
FmrQuahog
10 years ago
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brickeyee
10 years agonosoccermom
10 years agoRelated Discussions
What do 'closing costs' include?
Comments (3)Hi Eastgate, If your buyer is using conventional financing, their lender won't let them pocket any of your contribution toward their closing costs... so no worries there, its not like they're pulling a quick one on you. Here's a list with explanations of typical closing costs; http://www.nobullmortgage.com/closingcosts.php Cheers, Dave Donhoff Leverage Planner Here is a link that might be useful: List & Explanations Closing Costs...See Morecash vs. down payment/mortgage re closing costs
Comments (7)Closing costs come along with a mortgage or more accurately I suppose a loan? There are basically two types of closing costs. Those related to the purchase (aka transaction) and those related to borrowing any money to facilitate the transaction. Those related to the transaction are charged whether you are taking out a loan or not. Examples include title insurance, property taxes, transfer taxes, attorneys' fees, agents'commissions, certain other types of insurance. Some of these charges will be a fixed fee, others based on a percentage of the sales price. Some of these fees are charged by the title company and some by the state/local authority. The second set of closing costs are those related to taking out a loan. The appraisal fee (which is usually a fixed charge - say $350)and the origination fees (aka points - which is based on the amount of the loan. Each point is 1% of the loan amount). Seems like a lot of the closing costs come from the title company - and you have to do that anyway? I.e. why are loan closing costs a big deal? Most people finance their home purchases by borrowing the money. It costs money to borrow money. The largest cost of borrowing money is, of course, interest determined by the interest rate. The other big cost of borrowing is the origination fee, aka points. It's a big deal because it is a one-time charge based on the amount borrowed. So, it's variable. A point is 1% of the loan amount. If I'm buying a $500,000 house, borrowing 100%, and paying 1 point, it's going to cost me $5000 (just drop the last two zeroes on the loan amount.)If I put down 50% and finance $250,000, the point will cost me $2500. Some borrowers find it advantageous to "buy down" their interest rate. They might pay 2 points or more to purchase a lower interest rate over the life of the loan. Other borrowers might pay zero points and buy a slightly higher interest rate. Lenders will often tie interest rates and points together as a marketing tool to stand out against their competition. So, depending on the amount financed and the number of points charged, this particular cost of borrowing money can make or break the loan for a potential buyer. And do mortgage related closing costs go up with the amount of the loan? How why? Some do, some don't - see above. Why? 'Cuz. (LOL) Then depending on the last, only buying a house full price/cash is an advantage? A hefty downpayment and smaller loan gets you (no)where? Not necessarily. Sadly, Mary, this is where the math becomes really important. But a good mortgage calculator with a full amortization schedule can be a big help. It will calculate not only the monthly payment but the total interest cost of the loan (prepare for heart failure) and enable you to model different interest rate, loan amount, and payment scenarios. Stop thinking of it as math and start thinking of it as money...playing with money. So when people talk closing costs - are we talking two types? The type you pay no matter what - say you bought full purchase price - or even inherited a house. And the ones that come along with a loan? Which are loan ones and which are not? Yup...see above. Mary, the best way to understand the total transaction costs of a real estate purchase is to take out your settlement statement from you recent home sale. This is called the HUD-1. Then go to HUD's website and follow the line-by-line explanation of what each settlement line means. You'll see right away that the form is divided into loan costs and other costs. Doing this is akin to doing your taxes by hand. Despite the miracle of tax software, you will never understand our tax system better (and how it applies to you) than after you've done your taxes with paper, pencil, and a good tax manual. Something, each taxpayer should do at least ONCE in their lifetime. Same goes for the HUD-1. It's work but it's good work. Hope that helps. The concepts, guidelines, and rules-of-thumb are important but no piece of generic advice will ever replace working the numbers specific to YOUR situation, your financial needs, your psychology, and your future situation. Mary, I know how much you want to buy a home versus renting. You love "home" - it's a passion, a hobby, and a lifestyle for you. You also want a secure financial future and you have doubts about how these two fit together right now. I think it's great that you keep asking questions and seeking answers. I read that you had engaged a financial planner. As you review your decisions, you might want to start a new hobby - getting past math anxiety by learning more about consumer finances and financial planning. The math is such a small part of it. It's much more a process of thinking and mindset. You might want to see if your local county or community college offers financial education classes. It's a great way to meet people who have similar interests and it can become downright addictive. Fifteen years ago, I didn't know there was such a thing as a financial calculator...now, I carry one with me all the time. Playing with mortgage scenarios, calculating investment earnings, etc. is a great way to pass time while waiting in lines...sort of like having your own financial game-boy. Good luck!...See MoreWhat are those credit card people up to?
Comments (19)Scarlett, I don't think anyone has intended to give you "breezy advice", so I too am sorry if I have contributed to your hurt feelings. DH and I have been through several periods of difficult times. When we were first married, he didn't tell me he had debts from his previous marriage that he had walked off from when he joined the Navy. We returned to the same area after his discharge, and his creditors found us after we had acquired some cheap furniture and a car, on credit. Let's just say, at that time, "The Honeymoon was Over". The unexpected debt put us in dire straits because by that time we had a two-year-old and an infant. The car was totally an unwise purchase. DH wanted it so badly and he and the car dealer ganged up on me. I could've been the bad guy and refused to sign, but DH was getting lots of overtime at his job and I was lulled into a false sense of security at the ripe old age of 23. Of course the overtime dried up soon after. Then the car payment took all of one week's pay and then some. Shortly after that, there was a trucker's strike (this was in 1970) and DH was certain he would be laid off. So instead of waiting for the inevitable, he drove from KS to IN, where his brother lived, because his brother told him jobs were easy to find there and they paid higher. What he neglected to say was that the standard of living was somewhat higher there, too. DH found a job there and a house to rent, so we piled our meager belongings into a U-Haul trailer and moved. I was not one to run out on debts, so our landlord was paid what we owed and we notified our debtors of our new address. Of course this did not solve our financial troubles. It took me far away from my family and put us in an area where snow is on the ground from before Halloween to Mother's Day. We discovered our landlord was an alcoholic who was given to coming to my door and screaming at me for some imagined offense. His wife would let herself in while we were gone (they lived next door) and inspect, and leave me nasty notes. But I digress. I take the credit for getting us out of debt. I went to the library and checked out everything I could find about how to save money. One of the books I remember well was "Champaigne Living on a Beer Budget". It was then that I learned about how credit works, among other things. That first winter, I made my son's coat out of DH's Navy dress uniform. My daughter's coat was made from mine, as I had found a coat for myself at a yard sale. My mother had given me a bag of fabric scraps and I made my kids' clothes from that. I didn't have many clothes but I wore what I had. DH, for his job, had to have matching twill pants and shirts and steel-toe boots, so that took a chunk out of his pay. The first thing that I did with my new-found training, was to contact each creditor and ask them what was the least they would take to cancel the contract. I was surprised that they all had an amount right on the tip of their tongue. One of them quoted a realistic amount, that I could meet by arranging with the bank that held the car loan to just pay the interest for a couple of months. I shut everything down that I could. We ate a lot of macaroni and beans, drank nonfat dry milk. DH had no room to complain because they were, after all, his debts and he was in a long-term doghouse as it was. Getting the first creditor paid off was the hardest, but it was the "chink in the armor". With that payment off our backs, I was able to double up on the payments for another creditor, specifying that additional payment was to go ON THE PRINCIPAL ONLY. Before long, I had another one paid off. That following summer, we had enough money that I could use $20 every other Saturday at yard sales. When my $20 was gone, I was done. But I managed to buy, through that summer, jeans and coats and shoes for my kids, toys for the coming Christmas, tools for DH. When the magic day came that the car was paid off, it was like Christmas to me. Gradually we got on our feet. We bought a mobile home on credit and moved into a trailer park. It was our own home and the payment and lot rent was less than the rent we had been paying. Plus it was closer to DH's work. Then he was laid off. Then our son had an illness that landed him in the hospital and us with no insurance. DH got another job. He took a second job at a gas station. I used my skills to get things paid off. But it was hard because he still just "didn't get it". He thought he deserved something for all the hard work he was doing and kept buying things on credit: color TV's, expensive fishing equipment that he hardly used, an El Camino. I refused what I could, and we fought almost constantly. At one point it looked like our marriage was over. I was so sick and tired of being poor and him not taking it seriously. I took the kids and moved back to where my family was. He ended up selling what little we had and following, and we managed to patch things up, but it meant we were starting over again financially. I was able to get a job that paid pretty well, so at last we were able to have two incomes, but it meant the kids, by then 11 and 12, had no one at home with them. They got into so much mischief. If the neighbors weren't complaining, the kids were tattling on each other. But we were able to scrape together enough to buy a house in an older neighborhood that was not far from work for either of us. As time wore on, I doubled up on the house payments to shorten the length of our loan. Eventually I had the house paid off. We saved $17,000 in interest. Neither of our kids went to college. Our daughter dropped out of high school and our son, though he graduated, was not college material. DD made me a grandmother at the age of 42, and then didn't take her maternal responsibilities seriously, so we threw money at that problem for awhile. Then DH began having trouble with his knees and we discovered he had degenerative arthritis. Not long after, he became disabled. I had quit working, so I had to go find a job again. Shortly after that, it became clear we were going to have to adopt the grandsons. Then our son started having panic attacks and we had to throw money at that for awhile. And now, here we are. DH is 65 and I am 62. He has finally been able to have surgery, recovered well and is getting around better. Our grandsons are 18 and 19. The 19YO will graduate from HS this spring. The other is with DD and will probably drop out, not having applied himself and having nearly enough credits to be able to graduate any time soon. DS has managed to recover. We bought a small house that he lives in. He pays us an agreed amount every month and the house will be his soon. DD has just had bariatric surgery and then lost her job, so she is now looking for another. We bought another small house that she may end up having to move into for awhile. We are considering offering her the same opportunity to own a home that we offered DS. Neither of them have good credit so a conventional loan is out of the question for both. It seems everyone has to learn how to manage their money the hard way. But we are not in bad shape, considering all. We owe no debts. We own our own home plus the two little houses, free and clear. We own one recent-model extended cab pick-up. Signed our 12YO pick-up, that was well cared for, over to DGS that lives with us. We have money in the bank. I am now retired. My retirement check starts this month. It's not huge, but it's more than I thought it would be. Sorry for the length of this, but it illustrates the ups and downs of life. There have been times when I thought we were in such a horrible financial mess that we would never be able to recover. But we did. It took some know-how, but mostly just dogged determination. I shed many tears of hopelessness and frustration, spent many sleepless nights of worry. So trust me when I say "live within your means" and "Pay off all your creditors", I speak from experience. There is nothing breezy about it....See MorePatched up damage with wax! Demand Fix or not...
Comments (11)Well, I went there and 'nicely' inquired about how they will fix the scratches and the big wax fill. He was nice enough.. and told me that he'll wait till everyone else is done and then replace the whole thing - if need be. So that I feel better about. He seems so slow... we are suppose to close on the house in just 9 days - and Monday is a holiday. Now today while there, I found out he is missing about 12-14 doors/drawer fronts among some other finish pieces and it will take another 3 weeks for them to arrive. I have to say - that ticks me off, since the boxes have been installed at least 2½ weeks!...See Morencrealestateguy
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