Everything you should know before buying or selling Real Estate In Houston Texas

Closing Costs for a First Time Home Buyer

Just wanted to give you a heads up about something super important when it comes to buying a new home. Mortgage loans are a big deal, unless you've got a ton of cash lying around. Sometimes homebuyers forget about the other costs involved in the process. Like the ones outside of the down payment and monthly mortgage payment. 

So, let's talk about closing costs.

So when you're getting a mortgage, there are these two categories of charges that you'll pay your lender. It's pretty common stuff, but not all lenders charge these fees to everyone. 

Sometimes, if you've got really good credit, they might even skip these fees to make the deal sweeter. These fees should be included in the APR for your loan, which means your lender has to tell you about them upfront.

Closing costs are basically fees that you pay to your mortgage lender when you're about to close the deal on your home loan. 

Now, if you're thinking about all the costs and fees that come with buying a home using FHA loans or any other kind of financing, you might be wondering what else is included in these so-called "closing" costs. Well, before you officially become the proud owner of your new house, you'll have to sit down with your broker and real estate agent to finalize everything and pay these final costs. 

Now, here's the thing about closing costs - they usually range from 2% to 5% of the total price of your mortgage loan.

Let's say you're buying a $100,000 home and you've made a down payment of 10% ($10,000). If your closing fees come out to be 2% of the purchase price ($4,000), you'll need to bring an additional $1,500 out-of-pocket to cover these costs at closing. Oh, and by the way, you can't roll these costs into your monthly mortgage payments. So, be prepared to bring a cashier's check with you to pay up when the time comes.

What closing costs typically entail

Now, let's discuss what closing costs typically entail. Keep in mind that these costs can vary depending on your location and the type of mortgage loan you qualify for. In Texas, closing costs may include, but are not limited to: 

Origination charge: This is the fee that lenders charge for getting you a loan. Basically, it covers the service of hooking you up with a loan and paying the broker or loan officer who made it happen. It's like their commission on the deal. Now, the amount of this fee might be higher if your credit isn't top-notch, but it's usually around 1% of the loan amount, nothing too crazy. 

Points: Now, points are a charge that you can pay to get a lower interest rate. It's like a trade-off.  You pay a bit more upfront, but then you save on interest over the life of your loan. Usually, one point costs 1% of the loan amount. 

Services You Can Shop For 

Now, if you're looking to lower your closing costs and you're up for doing some shopping around, there are a few services you can actually shop around for. These ones might give you a chance to find a better deal.

1. Title services and lender's title insurance: So, the property's title is like the most important document in the whole home-buying process. It's the one that says who really owns the house, and if it's found to be invalid or fraudulent, that can cause some major issues. Title service companies are the ones who research the title to make sure it's legit. And lenders usually want you to buy an insurance policy to cover them in case there's any problem with the title later on. Now, the cost of all this can vary quite a bit from state to state. Title policies in Houston, TX cost about 0.5% to 1.0% of the home's purchase price and are included in the home's closing costs.
2. Home inspection: Your lender might want an inspection of the house's interior to check for any damage, pests, or other issues. Unlike an appraiser, a home inspector doesn't look at prices or other properties. They're all about finding any repairs that need to be done or anything that could affect the safety of the house. These folks might even crawl into attics and explore the darkest corners of the house, it's pretty thorough. Now, a home inspection can cost anywhere from $100 to $500. 
3. Postage or courier: You wouldn't believe how much paperwork is involved in selling a house. Sometimes, your lender might even hire a courier to make sure all the documents get where they need to be quickly and safely. And if that happens, you might have to pay up to $60 for that service. 
4. Survey: Now, not all states require this, but in some places, you'll need to get a survey done. This is where someone evaluates your property to determine things like the boundaries and the location of stuff like fences, walls, and gas lines. And this usually costs between $100 and $400. 
5. Attorney closing and settlement fees: Your lender might hire an attorney to go over all the paperwork and make sure everything's legal and good to go. And guess who gets to pay for that service? Yep, you do. These fees usually come in around $500 to $700.
6. Miscellaneous required services: And finally, the list of services you get from a lender can vary quite a bit. The Loan Estimate will have a spot for any extra charges that might pop up.

Services You Cannot Shop For 

• a) Appraisal fee: Before the deal is finalized, your bank will probably want to bring in someone to check out the house and make sure it's worth what you're paying for it. These folks, called appraisers, look at things like the size of the property, the features it's got, the condition it's in, and the prices of similar houses in the area. And for their services, appraisers usually charge somewhere between $300 and $500.  
• b) Credit report fee: Now, this is the cost to the bank of getting your credit report from one of those credit reporting agencies. Not all banks pass this fee along to you, but don't be surprised if they do. And hey, the good news is, it shouldn't be more than $30.
• c) Flood certification: If your house is in or near a flood plain, your bank might want some official confirmation of that. So you'll need to get a certification from the Federal Emergency Management Agency (FEMA), and that'll set you back around $15 to $20.

 Total Loan Costs 

So, when you add up all the stuff we talked about in sections A, B, and C, you get your total loan costs, which we'll call D. But hey, that's just one part of your total closing costs. There's more to come, so keep reading!

Other Additional Expenses

Taxes and Other Government Fees Just wanted to let you know about the government fees you might encounter when buying a home. These fees are charged by the local government (usually the county) to record the sale and make it public. The exact amount varies depending on where you are, but it's usually less than $200.

Transfer taxes, or transfer charges  Texans don't have to pay transfer taxes as a part of their closing costs. Still, the seller may be required to cover escrow and title fees, title insurance costs, outstanding property taxes or HOA fees and more.

Pre-Paids 

During the closing process, there are some upfront costs you need to consider for future homeowner expenses.  Some of these pre-payments are put into an escrow account, which is like a special holding account that can only be accessed in certain circumstances. This ensures there's a reserve in case something goes wrong with the deal or if, for any reason, you can't make a payment later on. Other pre-payments are made in advance to cover your first few weeks, months, or even a year in the house. 

Prepaid homeowners insurance: You definitely want to protect your house (and maybe your belongings too) from any unfortunate events like bad weather, fire, or theft (though it usually doesn't cover flooding or earthquakes). Most lenders will require you to buy insurance for your home, and these policies are prepaid for several months to a year. At closing, it's typical to pay for the first 12 months of insurance upfront. The cost varies depending on the coverage you need and where you live, but it can range from a few hundred dollars to several thousand dollars a year. 

Up-front mortgage insurance premium: Depending on how much you're putting down as a down payment, your lender may ask for mortgage insurance. This might require an up-front prepayment that you'll owe at closing. 

Prepaid daily interest: If you're closing on your home in the middle of the month, you might need to cover the interest for the days until your first full month in the house begins.

Initial Escrow Payment at Closing Escrow homeowners insurance: Sometimes, lenders may want you to put some money into an escrow account to cover homeowners insurance, just in case you can't make a payment down the line. This way, the home will be covered for a few months even if you run into financial trouble. This is more common when your down payment is less than 20%. Your Loan Estimate should show you the amount you'll need to put in escrow to cover two months of homeowners insurance. 

Escrow property taxes: Lenders want to make sure borrowers stay up to date on their taxes because the government can place a lien on a house with unpaid property taxes, or even foreclose on it. Property tax liens have priority over mortgage liens, meaning the government would have claim on the house before the lender. Setting up an escrow account for taxes gives the lender a backup in case you miss any tax payments and reduces the likelihood of a property tax lien. 

Owner's title insurance: This is an optional insurance policy that protects you, the homeowner, in case there are any issues with the title of the property. For instance, if a previous owner of your home was foreclosed on and later wins a legal challenge against that foreclosure, your claim on the home might be found to be invalid. In that case, a homeowner's title insurance policy would save you from any financial loss. The rates for these policies vary widely, but they can cost more than 0.5% of the loan balance.