Mortgage fees can be a terrible burden for people who are getting into a new home or refinancing their mortgage. Rather than starting the home-buying process and being surprised by the fees that are involved in closing, homeowners need to remember that there are three fees that could make their life quite difficult come closing time.
1. PMI
PMI is not a fee. Actually, PMI is mortgage insurance that companies put onto loans that are new and stay there when they homeowner has little to no equity. PMI can add up to 10% to a mortgage payment when the homeowner has already calculated their payments based on the interest rate they can get and the terms of the mortgage.
While PMI is “standard” for many loans, it is not impossible for homeowners to get away from PMI and change the amount they are going to pay for their mortgage every month. Negotiating with the mortgage company can start the homeowner on a path to eliminating their PMI before the closing ever happens. Without this knowledge, homeowners will end up paying more for their mortgage and likely be stuck with mortgage insurance that they cannot get rid of.
2. Closing Costs
There are costs involved in every closing, but those costs can be minimised if the homeowner understands how the process works. There must be an attorney present at closing to make sure that all papers are signed and filed properly. However, the attorney is the only person who needs to be paid for their time during the closing.
The closing costs on a loan can become quite exorbitant when they are levied by the mortgage company. There can be fees for the closing paperwork to be filed, to register the new account, and to check on all aspects of the home. However, all of these things are taken care of by the attorney or are handled prior to the loan ever making it to closing.
When reading through the terms of the loan and checking all the fees, the only thing that homeowners should pay for are the attorney’s fees and commission that goes to the real estate agent (if applicable.) When the fees are understood ahead of time, homeowners can keep from being surprised at the closing table. Use a mortgage calculator to identify your monthly payments.
3. Commissions
Commissions are an important part of the real estate sales process. There are those who can make quite a bit of money on selling real estate, but the commissions must be properly determined prior to closing based on the contract that was written for the home. Sometimes, the seller agrees to pay commissions out of their profit from the sale. Other times, the buyer agrees to pay the commission for the agent as part of their closing costs. Ensure that the commission agreement is adhered to prior to closing.
In each of these cases, homeowners can avoid problems with closing on a home by simply checking the fees that are to be paid so that there are no surprises before the documents are signed.