Mortgage Payments and Closing
Mortgage Payments
This remains an area where many homeowners are confused. When paying RENT, the tenant pays in advance of actually renting the property. When you close on the home you are buying, the first full payment does not become payable until some 30 to 45 days later. However, at closing you will pay interest from the date of closing until the end of the month in which the property is closed. You then “miss a month” and your first full payment becomes due on the first of the subsequent month. The confusion exists primarily when the property is sold. Simply remember that your payment is after the fact,rather than before the fact. For example, a mortgage payment which is due on the first of August pays the interest for July.
Closing Costs
The term “closing costs” covers a multitude of fees which are involved in any real estate transaction. The lender will have fees which you will be responsible for paying, and the closing attorney will also have fees for researching the title, preparing paperwork, etc. A simple rule of thumb to follow is to ask who is responsible for which cost. The following are some items that are normally considered purchasers closing costs.
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Purchaser's attorney fees
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Title Search or Abstract
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Recording Fees
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Lender's Title Insurance
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Purchaser's Title Insurance
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Document preparation
The following items are also included in the term "closing costs" and are fees involved in obtaining your loan:
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Discount points
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Origination Fee
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VA funding Fee
Pre-Paid Expenses
What are "pre-paids"? This is a description that simply means TAXES AND INSURANCE. In order to purchase a home, a buyer must have sufficient cash available, in addition to his down payment and closing costs, to pay for approximately 15 months of home owners insurance and 3 months of taxes. There are few, if any, loan companies that will permit a seller to pay for a purchaser's pre-paid items.