Will I Need Money Other Than My Down Payment?

Yes. 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.

The 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.

After 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?

If 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

WASHINGTON, 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.

The 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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