Will I Need Money Other Than My Down Payment?
Unless you are paying cash for your home, there are costs involved in
obtaining a loan. These costs vary from lender to lender and state to
state. However, I have listed the most common closing costs that you can
expect to have. When you go in to see your lender for pre-approval or
actual loan application, they are required by law to supply you with a
written "good faith estimate"
within 3 business days of pulling your credit report. The good faith
estimate is an itemization of the closing costs required to close the
loan. This estimate should be accurate, but will vary depending on the
day of the month on which you close.
Closing costs are usually divided into two categories. The first category is "closing costs" and the second is "pre-paid items".
The closing costs are comprised of the fees necessary for the lender to
gather information to process and close your loan. As you look through
the list below, you will see what I mean.
pre-paid items consist of money placed into an escrow account, which
will be used to pay your property taxes, homeowner's insurance and any
Kentucky mortgage insurance required.
the closing, your lender will be responsible for paying the property
tax bill, homeowner's insurance bill and mortgage insurance out of your
escrow account. Your monthly payment can fluctuate, depending on the
increase or decrease in the amount needed to pay these bills. For
example, as time goes by, hopefully your property value will increase.
Your local Property Valuation Office is very aware of this and they
routinely check neighborhoods and make adjustments to the assessed value
of your property. As the assessed value of your property goes up, so
does your property tax bill. See what I mean?
your loan to value ratio is less than 80% you may not be required by
the lender to escrow funds for your property taxes and homeowner's
insurance. Check with your lender, they may allow you to do this, but
may charge a fee at closing for the service.
This Just In!
PMI cancellation law takes effect
D.C. - The law providing for cancellation of private mortgage insurance
took effect July 29, putting the force of the law behind homebuyers who
have taken out loans since that date and request PMI cancellation once
their equity reaches 20 percent. Cancellation is automatic once their
equity reaches 22 percent. The law also requires lenders to inform
borrowers about changes in their mortgage insurer.
provisions don't apply to loans made before June 29, though lenders
have historically allowed borrowers with good payment records to request
cancellation once they've accumulated 20% equity. And lenders with
Fannie Mae or Freddie Mac conforming loans may offer borrowers automatic
PMI cancellation once their loans are halfway through their
amortization term, regardless of when the loans were made. Realtor
Magazine, August 1999
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