Depending on your mortgage program and final underwritten conditions, you may have to re-submit the most recent 30 days of income and asset documents, as well as have a new credit report pulled.
Worst case scenario, the lender may even require a new appraisal that reflects comparables within a 90 day period.
It’s important to know critical approval / condition expiration dates if your real estate agent is showing you available short sales, foreclosures or other distressed property purchase types that have a potential of dragging a transaction out several months.
Yes, No and Maybe…
If you are in a financial position where you are qualified to afford both your current residence and the proposed payment on your new house, then the simple answer is No.
Qualifying based on your Debt-to-Income ratio is one thing, but remember to budget for the additional expenses of maintaining multiple properties. Everything from mortgages payments, increased property taxes and hazard insurance to unexpected repairs should be factored into your final decision.
You’ve heard of the acronym PITI (Principal, Interest, Taxes and Insurance). The escrow account covers the T&I, and is included in the monthly payment.
Government loans, FHA and VA require an escrow to be established when a new purchase or refinance transaction is finalized.
If the LTV is low enough on certain other loan programs, an escrow waiver is allowed. However, there is typically a higher interest rate associated with a mortgage payment that doesn’t have an escrow account due to the lender taking on more risk.
The remaining reserves are generally refunded back to the homeowner.
Yes, you can request an escrow account at anytime. Keep in mind that you’ll have to deposit at least 12 month’s of hazard insurance, as well as around 6 month’s of tax payments in the escrow account to get it established.
The date of your closing is all about how you view the money being applied. Pay now or pay later, but it will always be collected.
Let’s first look at how mortgage payments are broken down:
When you pay your rent for the month, you are actually paying for the right to live in the house for the upcoming month.
However, your mortgage payment is broken into four separate components; principle, interest, taxes and insurance (PITI).
The principle is paid towards the upcoming month, interest is paid towards the previous month and the taxes and insurance are deposited into an impound account.
As far as closing on a particular day of the month to save money on interest payments, it depends on the type of loan program you are using.
If you’re more concerned about successfully closing with the least amount of stress, then early to mid month is usually the best time to close
No, in fact FHA refinances should always close at the end of the month because you are responsible for the entire month’s interest.
Not really, however you can save a couple dollars by closing early in the month, just avoid closing on a Friday because you could be responsible for the interest on two loans over the weekend.
An Earnest Money Deposit (EMD) is simply held by a third-party escrow company according to the terms of the executed purchase contract.
For example, there may be a contingency period for appraisal, loan approval, property inspection or approval of HOA documents.
In most cases, the Earnest Money held by the escrow company is credited towards the home buyer’s down payment and/or closing costs.
*It’s important to keep in mind that the EMD may actually be cashed at the time escrow is opened, so make sure your funds are from the proper sources.
In most cases, the buyer is not responsible for covering the cost of their real estate agent.
When a home owner hires a real estate agent to list, market and sell their property, they’re also (in most cases) agreeing to compensate the agent representing a buyer.
A common myth is that a buyer will get a better price on a property if the seller doesn’t have to pay the typical 3% to a buyer’s agent. However, it’s more expensive to buy an overpriced property, not negotiating properly for the acceptable seller paid closing costs, overlooking important language in the purchase contract, missing potential commercial zoning updates on a nearby lot, or buying a home that has a lawsuit against the HOA.
Mortgage points are fees charged by the lender for services and/or a lower interest rate.
One Mortgage point is equal to one percent of the loan amount. For example, on a $100,000 mortgage $1,000 would be equal to one point.
Understanding what points are and how they work can save you thousands of dollars on your mortgage. Borrowers can pay mortgage points to reduce the interest rate charged on their mortgage. The Borrower may also choose to raise the interest rate to reduce the closing costs. This is sometimes called buying up your interest rate. This buy-up strategy is used when the intentions of the borrower is to keep the mortgage for a short period of time.
To decide whether or not to buy-up or buy-down your interest rate you must first calculate a breakeven point. The following formula can be used:
Cost of buy down / monthly savings = months to breakeven point. If you plan to keep the mortgage longer than the breakeven point then buying down points may be beneficial to you.
For example: $1,000 cost to buy down rate / $100 savings per month = 10 months to breakeven
In the above example if you plan to keep the mortgage for more than ten months (the breakeven point) you should buy-down the interest rate. In the above example if you kept the home for five years your savings would be $5,000.
Make sure you consider mortgage points in your strategy when getting a loan. It can save you thousands of dollars.
Yes, they may be tax deductible, but make sure to speak with your tax advisor.
Mortgage points usually are calculated in 1/8 increments. A good rule of thumb to follow on a 30 year fixed rate is for every .25% drop in interest rate it will cost you one mortgage point.
Yes, this strategy is usually used when the borrower is planning to keep the mortgage for a shorter period of time.
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