Our community Lunch and Learn seminars on buying a home are among our most popular. Ours pros are available to explain the entire mortgage process and answer your questions.
After speaking with our presenters, I put together this list of your five most common questions. Please share this with anyone who might be buying a home!
Why are closing costs so high?
Closing costs are made up of many expenses. These include third party fees (appraisal fee, credit report fee, settlement fee, title insurance fees, etc.), taxes/recording fees, lender fees (origination fee, processing/underwriting fees, points) and pre-paid items. The pre-paid items may include your initial escrow deposit (a few months of private mortgage insurance and property taxes, for example) as well as per diem interest and your homeowner’s insurance premium.
What is PMI and how do I get rid of it?
PMI is private mortgage insurance. This protects the lender in case you default on your mortgage. It is required when the loan amount is greater than 80% of the property value. To avoid getting mortgage insurance, you would have to make a down payment of at least 20% of the property’s purchase price.
If PMI is required when you first secure the loan, the monthly PMI payments are required for at least one full year. After that point, you can contact our mortgage servicing department and pay for a new appraisal if you believe that you have at least 25% equity in the property. If your appraisal indicates 25% or more equity, your mortgage insurance will be canceled.
There is also another, simpler, option that will eliminate PMI. Once you pay down your loan enough that the remaining balance is 78% or less of the original appraised value of your property, the PMI will be removed automatically.
Who pays for the attorney? Is it required?
A lender’s attorney is required and will be paid for by the buyer through closing costs. A buyer’s attorney is optional. If you have your own attorney present for the closing, that will be an additional cost to you.
What is title insurance?
Title insurance protects the interest in your property from people or businesses who claim that they own all or part of your real property. There is Lenders Title Insurance which protects the lender and is required. It is paid for by the borrower through closing costs. There is also Owners Title Insurance which protects the owner. It is optional and paid for once by the borrower through closing costs.
What is the minimum and ideal credit score?
Credit/FICO scores can range from 300 to 850. While Hanscom FCU reviews a variety of factors to make a loan decision, it is generally challenging to obtain a mortgage with a median credit score below 620.
Homebuying is just one of the many topics that we cover in our Lunch and Learn programs. To learn more about the many topics that we cover and to request a free presentation for your employees, contact me. I can explain how this free financial service is one of the most appreciated and impactful programs you can offer to your employees, helping to reduce stress and make them more productive. Plus, I bring lunch!