The initial price that home buyer pays for a home does not include all of the costs to complete the transaction. These additional costs are expenses generally attributed to obtaining a home mortgage and the closing costs associated with that mortgage. Many buyers fail to evaluate the total sum of closing costs involved in obtaining a new mortgage and new home. A mortgage loan calculator is one tool to help measure both loan costs and total home costs.
Closing costs can certainly add up to a significant sum. A mortgage calculator is a good tool that can be used to evaluate the impact on the cost of a home purchase due to the closing costs. Unfortunately, too many home buyers use the mortgage payment calculator by itself to compare and ascertain monthly mortgage payments or use a mortgage qualification calculator to measure factors such as the down payment needed. In each of these cases, the potential home buyer is not adequately assessing the total cost of the home because they are ignoring the closing costs.
Since the closing costs can add up to a significant sum and should be factored into the total cost of the transaction, a mortgage calculator can aid in adding up these costs, measuring the impact they may have on the total cost of a home loan as well as simply forcing a potential buyer to review these figures before jumping into a new home loan.
Most mortgage loans involve a range of closing costs. Each of the closing costs should be entered into the mortgage calculator to see how they will impact the total amount of funds needed to purchase or refinance a home loan. For purchase transactions, the closing costs and down payment need to be paid at the time of closing. As an example, if a home purchase and home mortgage require a 10% down payment on a $100,000.00 purchase and there are $3,500.00 in closing costs, that buyer will need to have at least $13,500.00 available to close on the home and this does not include any required reserves to be available as is common in most all mortgage loan transactions.
For refinance transactions, the closing costs will generally have an option to finance these costs into the home loan amount. As an example, if a the pay off amount on an existing mortgage is $97,550.00 and the closing costs add up to $3,500.00, the borrower may have the option to refinance a loan amount of $101,050.00 and not have to bring funds to close on the refinance transaction. Of course, these added costs will impact the total costs of the home loan as well as the mortgage loan APR. The changes in the mortgage loan APR and total costs over the life of the loan can also be evaluated with the online mortgage calculators. A mortgage payoff calculator may also be beneficial to use before engaging in a refinance transaction.
Common closing costs found on most mortgage transactions that should be included in the mortgage calculator input will include the following:
Loan Origination Fees: This is what mortgage lenders charge for processing or originating a home loan. Origination fees or points can vary significantly between lenders.
Loan Discount Points: Loan discount points are costs charged by the mortgage lender, usually established to reduce the mortgage interest rate on the home loan (one point equals one percent of the total loan). A home loan with a larger discount points should have a lower interest rate. A borrower can pay discount points to bring down the loan’s interest rate.
Title and Settlement Charges: Most mortgage lenders require a title search and title insurance to assure that buyer or homeowner and the mortgage lender that the seller is the legal owner of the property and that there are no outstanding claims or liens against the property. Title insurance policies are designed to protect the lender against an error in the results of the title search. The cost of the policy (a one-time premium) is usually based on the loan amount and is often paid by the buyer.
The loan closing or settlements may be conducted by the title insurance company, mortgage lender, escrow companies, or attorneys. In most cases, the settlement agent is providing a service to the lender, but the cost will be paid for by the buyer. Costs for settlement services vary widely.
Tax and Insurance Escrows: Most mortgage lenders require that the borrower set aside money in an escrow (or reserve) account to pay for property taxes, homeowner’s insurance, and flood insurance (if applicable). This is an account into which the home buyers deposit money and lenders pay portions of your home owner’s insurance and property taxes as they are due.
Mortgage Lender Fees: These items generally include costs such as the credit check, property appraisal and flood certification.
Interim Interest: Between the time that buyers take possession of their new home and the date of their first payment, interest is accruing on the home loans. This amount is charged up front at closing and will depend on the loan amount, interest rate, and number of days between settlement and the first monthly mortgage payment.
Taxes and Recording Requirements: Depending on the state and city, a buyer may be required to deal with the costs for transfer fees and recording fees. Transfer and recording fees may be low some areas or can cost as much as 1% to 2% of the purchase price.
To assure that you are obtaining the best mortgage loan and that the correct figures are used with the mortgage loan calculator, be sure to shop and compare mortgage rates and closing costs from more than one mortgage lender.
Tags: closing costs, home loan, mortgage calculator, mortgage lender, mortgage loan calculator, mortgage payment calculator, Mortgage Payoff Calculator, mortgage qualification calculator, mortgage rates, online mortgage calculators, refinance
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