Q & A: Closing costs

June 2014

Question:

I’d like to buy as much home as possible, seeing now is a good time to buy. I was told, however, that the closing costs of a home may prevent me from buying as much home as I want. Is it true?

Answer:

Closing costs can definitely add up. Typically, closing costs are 2-5% of purchase price of a home. Closing costs include non-recurring and recurring costs. Non-recurring closing costs include such one-time charges as title insurance coverage, escrow, survey, notary, courier, wire or other delivery fees, attorney and appraisal/inspector costs, recording and transfer taxes, buyers broker fee, if applicable and so on. Plus, you may be paying your lenders points on the loan amount. Recurring fees include home, flood, fire insurance, private mortgage insurance, property taxes, prepaid interest etc. If it’s a short-sale, you may incur additional fees like the one charged by the escrow or closing agent, or 3rd party short-sale negotiation company, if one is involved.

My TIPS:

1) Oftentimes, many of the fees that make up closing costs are negotiable, and some are completely unnecessary, especially things such as high administrative, mailing or courier costs charged by your lender. Shop around for your mortgage!

2) Also, you can ask for a sellers concession. The concession can be as high as 6% (for FHA). Talk to your real-estate agent for further details and possibilities.

Bought a new home? Would you Sell or Rent your current home?

June 2014

rent image

You are a homeowner. Your family is increasing in size OR your income is increasing and you decide to move to a bigger place. What would you do with your old home?

Depends!

Those who want to buy a new home using proceeds of the old one will naturally, Sell. This is what most people do.

However, those that are blessed with a good income and can afford another mortgage or have paid out the previous home, may keep the old one- and rent it out.

The latter trend, though still a minority, is on the upswing. If the trend holds, it could mean even fewer homes for sale in an already uptight market. Which means an artificial price increase for the fewer homes that come on the market!

However, renting old home does make sense for some. Those who bought houses after the ‘Big Housing Bubble’ bought them cheap. In order to help with the recovery, Federal Reserve kept the mortgage rates at record lows- leading to a surge in refinance markets.

So? Those who bought cheap and/or refinanced ended up making lower monthly mortgage payments- and automatically saw their net rents increase!

Those who bought during the bubble- They may not be able to recover the purchase price of their property if it were sold in past 2-3 years. If the refinance even brings the monthly mortgage to the level of current rent- meaning, the rent pays off the mortgage, then homeowners prefer renting and holding on to their property till the price appreciates to reduce or nullify their losses.

There are even those who want to try out moving to another place/state/country; but hold and rent the old home. Just in case the new move doesn’t meet expectations, they can always come back.

Its great being a landlord. But as they say ‘Landlord should consider him/herself very lucky if they find good tenants’. Being a landlord comes with its own set of pros and cons. Landlords have to deal with the 3 T’s- Tenants, Toilets, Taxes. However, that I will discuss in another blog.

Thus, the wait-and-see approach is common. Conditions may change if rents fall or property prices rise enough making it lucrative to sell.

Did you rent your home recently? Would love to hear about your experiences!