Whether you’re buying a new home or refinancing your current home the process isn't much different from a mortgage standpoint. The major difference will be the costs the Borrower has to pay. There will be closing costs in either situation, and in addition to closing costs on a purchase transaction there will also be a down payment requirement. HOWEVER, there are programs out there that can lower down payment requirements and even closing costs. But to be completely honest to buy a home with zero out of pocket costs is just not likely to happen. You should expect to have money available for down payment and closing costs. Lenders want to see that the borrower has made some contribution and has some financial interest in the property.

How Much Are Closing Costs?

Real quick.... In the mortgage industry we consider any funds needed to close other than down payment as closing costs. Down payment and closing costs combined we call cash-to-close. It's not uncommon for cash-to-close and closing costs to be used interchangeablly. But, at the closing table Borrowers will bring a lump sum to pay "closing costs" which is actually both the down payment and closing costs. It can cause confusion so I wanted to mention it.

Down Payment: In general, Borrowers should expect to have a minimum down payment of at least 5%, the more you put down the better. A larger down payment will help lower your interest rate, minimize or prevent mortgage insurance and of course helps lower your monthly mortgage payment.

Closing Costs: Closing costs gets a little tricky because it depends on the property, the Borrower's qualifications, the loan program and escrows. Common closing costs are: Underwriting fee, Points, Tax/flood Monitoring fee, Appraisals, Title Work including Title Insurance, Government Taxes and Recording Fees, Prepaid items such as Interest as well as Homeowner's and Flood Insurance Premium, Escrow funds for Property Tax, Homeowner's and Flood Insurance, Survey, Pest Inspections and any Association fees. As I mentioned before, none of these costs are paid to me, the Lender pays me except in rare cases. Most of these costs are based on the size of the mortgage and/or the property. So, to say exactly how much closing costs will be is almost impossible until the specifics of the property are determined.

DON'T WORRY, I'M HERE TO HELP! I will provide you a closing cost estimate based of your loan and the property. I work very hard to ensure there are no surprises along the way. This is why I HIGHLY recommend you get pre-approved before looking for a new home to buy. During the pre-approval process I will be looking for things that will cause problems and help you better understand the costs associated with your mortgage. We will also discuss common pitfalls that can sabotage your ability to get a home loan.

Once again, I hope this sheds some light on down payments and closing costs, and my commitment to YOU throughout the process.