Basics and Payment Options for Closing Costs

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Within the purchase of a home and the obtaining of a mortgage, there’s one important area that often gets glossed over: Closing costs. These refer to various fees and payments that are paid when you finalize a home purchase, and they’re generally fairly significant.

At Altius Mortgage and our partners at Mortgage Ogden, we can help walk you through all the potential closing costs you may be in for. Here are some basics on what these costs are, how they’re calculated, and what your options are for paying them.

Closing Costs Defined

Closing costs refer to all extra expenses beyond the home’s purchase price. In general, closing costs will run between two and five percent of the total loan amount.

Costs that are usually part of the deal here include: Origination fees, property taxes, appraisal fees, insurance and escrow costs, and sometimes others. These will vary based on the area in question, and even based on the individual mortgage lender.

Closing Cost Calculation

Closing costs for mortgages are calculated using a combination of third-party expenses and lenders fees. Appraisals and inspections come with set fees, while other fees will be adjustable. When you apply for a mortgage, your lender will provide you with an estimate of closing costs within three days – this won’t necessarily be 100 percent accurate, but it will give you a good idea. You’ll then receive a final closing disclosure before the deal closes, and this will be precise.

Options for Paying Closing Costs

There are a few options you generally have at your disposal for paying closing costs:

  • Up front: Usually done by cashier’s check, this is the simplest method for paying closing costs if you have the funds. This method keeps mortgage rates lower and avoids increasing the mortgage amount to cover the costs.
  • Rolling into loan: Available for most types of loans, this is where your mortgage amount is increased to include closing costs. This will increase your mortgage rates and monthly payments a bit, however.
  • Lender pays: In certain cases, known as low-cost or zero-cost closing loans, the lender themselves will pay the closing costs. This will not increase the loan amount, though this is the option that will generally come with the highest rates and monthly payments.

For more on closing costs, or to find out about any of our other mortgage services, speak to the pros at Altius Mortgage today.

New Year’s Resolutions for First-Time Buyers

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The first 12 months of homeownership will set the tone for your entire experience, and it’s also one of the prime periods where you can make a few smart decisions that will save you money and help build your investment. And with the new year just past and resolutions abound, it’s a perfect time to take stock and see where you can tighten the belt.

At Altius Mortgage and our partners at Mortgage Ogden, we’re here to help. If you’re a first time homebuyer, here are some good New Year’s resolutions to try and stick to within this first 12 months of ownership.

Homeowner’s Insurance and Home Warranty

You should take a close look at your homeowner’s insurance policy, as these are not one-size-fits-all and the PMI rates you pay may not reflect adequate coverage. Check the exclusions on your policy – areas that are not covered. Does the policy cover jewelry and other personal valuables? What about injury due to pets? The home is your biggest asset, so you should spend time reviewing how it’s covered.

In addition, especially if you notice that some appliances in your home are near the end of their life cycles, consider a home warranty (or service contract). This is an annual agreement that essentially functions as insurance for these appliances. Be sure to read these agreements carefully, as there’s important fine print.

Emergency Fund

Homeownership can spring up little expenses you hadn’t expected, especially during the first 12 months. Keep an emergency fund stocked for any sudden needs – this should cover several months of expenses ideally, but it’s okay to start smaller and work up each paycheck.

Equity Building

In most mortgage situations, you’re constantly building equity in your home as you pay off your debt. Equity refers to how much of the house is paid off, and it can be used to secure loans or other forms of financing if you build it up well enough. If you’re in a good enough financial spot, consider ways to begin paying your mortgage off faster to build your equity.

Energy Efficiency Audit

Heating and cooling are not cheap areas, and you should check to make sure you’re getting your money’s worth here. Spend time early in your homeownership checking on things like temperature between rooms or any strange smells, and if you’re even a bit concerned, consider an energy audit. This uses special measures to detect air infiltration or missing insulation in important areas, and can save you a ton in the long run on utility bills and repairs.

For more on smart New Year’s resolutions for new homeowners, or to find out about any of our mortgage services, speak to the pros at Altius Mortgage today.