Many people wonder about Closing Costs for their Arizona mortgage loan. In addition to underwriting, processing and origination fees there are several other costs associated with a new property purchase.
As we mentioned earlier, you should be compiling a talented professional team. Of course, each member of this team needs to be compensated for their work so it’s wise to know how to budget for their services.
Common Out Of Pocket Expenses:
- A home inspector will evaluate many areas of your home to ensure that all systems are functioning as they’re intended which makes this expense money well spent!
- A Termite and Pest inspection of your home could likely be one of the best investments you ever made. Arizona’s dry weather, hot temperatures, and desert habitat make it one of the most termite prone regions of the USA. It is worth every penny to make sure your house hasn’t been on the menu of termites.
Condominium Questionnaire Fees
- Fees can range anywhere from $0 to $300 and can take up to 30 days to receive, so be sure to plan ahead!
Well and Septic Certifications
- If your home has either one of these systems, you will want to be sure they are functioning properly.
- Depending on your state, the size of the loan, the type of property, the loan program or even the individual lender an appraisal may be required that will be paid up front by the borrower. In some cases, more than one appraisal might be required so be sure to budget appropriately.
A typical purchase will involve some of these services but not necessarily all of them. Make sure you discuss with your team all of the potential out of pocket expenses that might arise so you do not have any unwelcomed surprises during the mortgage loan and purchase process.
Be sure to note that the people providing these services will expect to be paid regardless of the purchase being completed. With fees that could build, in total, to over $1000 it is important to have these funds set aside at the beginning of the entire process.
Frequently Asked Questions:
Q: Where does my earnest money go?
A: An Earnest Money Deposit (EMD) is an amount held by a third-party escrow company. In most cases, the EMD is credited toward the home buyer’s down payment or closing costs.
Q: Do I have to pay my real estate agent on a Purchase Transaction?
A: In most cases the buyer is not responsible for covering the cost of their real estate agent. When a home owner hires an agent to list, market and sell their property they also agree to compensate the agent representing the buyer.
Q: What are “Points”?
A: Mortgage points are fees charged by the Arizona mortgage lender for services and/or to “buy” a lower interest rate. One mortgage “point” is equal to 1% of the loan amount. Understanding what points are and how they work could save a borrower thousands of dollars on the mortgage. There is a simple formula to use when deciding to buy points:
*Cost of buy down divided by the monthly savings = the number of months to break even.
As an example: $1000 cost to buy down your rate / $100 savings per month = 10 months to break even.
In this case, if you plan to keep the mortgage for more than 10 months then you should buy down the interest rate. If you keep that home for 5 years your savings would be $5000!
Q: Are “Points” tax deductible?
A: They could be! We always advise that you speak to your tax advisor for a definitive answer.
Q: Can I pay more than one point for a lower rate?
A: Points are usually calculated in 1/8 increments. A good rule of thumb to follow on a 30 year fixed rate is for every 1/4% drop in rate it will cost you one mortgage point.
Q: Is a “No Origination Loan” or “No Cost Loan” a form of buying up a rate?
A: Yes. This is a strategy often used when the borrower is planning to keep the mortgage for a short period of time.