What to Expect at Closing

WHAT TO EXPECT AT THE CLOSING OR SETTLEMENT

WestStar Mortgage, Inc., knows that out of the entire home buying or borrowing experience, the closing costs can often be the least understood part of the process.  We will take the time to explain our Good Faith Estimates (GFE’s) and want you to know about the details as we do.

Closing Costs:

These costs can vary from lender to lender and are generally considered as any costs tied to the purchase of a new home or in procuring the financing to purchase or refinance your home.  Today, these costs range from 3 to 6 percent of the home’s purchase price and include three basic categories:

Prepaid Expenses:

Prepaid expenses include homeowner’s insurance, mortgage insurance and the cost to set up an escrow account.  An escrow account is when a lender will pay the annual insurance premiums and various taxes, (city, county, school or town), on the borrower’s behalf. The amount that goes into this account is based on the first year’s premiums; an additional amount also is included to pay for the future premiums. Because they vary based on the type of property and the time of the closing, prepaid expenses are difficult to determine.

Mortgage Points:

A mortgage point is equal to 1 percent of the mortgage loan amount and actually helps reduce the loan’s interest rate.  For example, depending on the prevailing rates, a $100,000 mortgage might be obtained at 5.25 percent with zero points, or at 4.75 percent with 1.0 points. Obtaining the lower interest rate would cut the mortgage payment by about $30.55 a month, but would require $1,000 or 1 point, up front at closing.

Out of Pocket Expenses:

Fees for appraisals, attorneys, credit reports, deed recording, tax services and other miscellaneous expenses make up the out of pocket expenses. Usually performed by a third party, these fees for services are directly charged to the borrower.  The majority of out of pocket fees are necessary and legitimate; however, if the borrower encounters a fee that causes confusion, they should ask the mortgage professional about it.

Purchasing a home is one of the most significant decisions and one of the largest financial investments you can make in your lifetime. It is absolutely vital that you understand and appreciate the complete process from start to finish.  The only sure fire way to avoid any unnecessary surprises and remain confident in every facet of your loan approval experience is to consult with your WestStar Mortgage, Inc., licensed professional.