FAQ

Frequently Ask Questions

General Questions

What does my Mortgage Payment consist of?

Your monthly mortgage payment will be comprised of a number of different elements, which you satisfy with a single monthly payment to your lender.

The largest component will be your mortgage payment (both interest and principal payments) that goes toward the financing and purchase of your home.
You will also be responsible for real estate taxes assessed as a percentage of your home value.
Home insurance will usually be required by a lender.

In addition, if your down payment is less than 20% of the total home value, you will be responsible for making a Private Mortgage Insurance payment.

What is a down payment?

The down payment is the amount of cash that you must provide to your lender at closing as a purchase of your equity in the home. This required amount can range from as low as 3.5% of the home value to over 20% – although you are free to contribute a higher amount if you wish. You will also need to pay closing costs to purchase a house, which will increase the amount of cash you need up front.

What is the difference between a Fixed Rate and Adjustable Rate Mortgage (ARM)?

Mortgages can come in two types: fixed and variable (known as an Adjustable Rate Mortgage, or ARM):

Fixed rate mortgages have a constant interest rate and the monthly repayment amount will remain the same throughout the term of the mortgage

An ARM is a loan where the interest rate charged on the outstanding amount owed varies as market interest rates change. Most ARM’s are structured to have a fixed payment for a defined period of time, followed by a period where the interest rate can fluctuate within certain boundaries. For example, a 5 year ARM will have a fixed payment for the first 5 years. The amount the mortgage can change is limited by caps defined when you take the loan.

What is mortgage insurance?

Mortgage Insurance is a type of insurance designed to protect the lender in the case of a default on the mortgage.
Types of mortgage insurance
- FHA Mortgage Insurance: FHA provides insurance on loans provided by pre-approved lenders. The insurance provides the lender with protection in the event the borrower defaults on the loan. Loans must meet certain requirements established by FHA to qualify for insurance. While FHA loans allow borrowers to put down as little as 3.5% the drawback is that you have to pay an upfront insurance premium in addition a monthly premium on top of your mortgage payment. It is important to note, that you could potentially pay FHA mortgage insurance for the life of the mortgage, based on the specifics of your loan.
- Private Mortgage Insurance: If your down payment is less than 20% of the home value and you choose not to get an FHA loan, you will be required to obtain Private Mortgage Insurance (PMI). Similar to FHA insurance, PMI requires the borrower to pay a monthly premium (but no upfront premium) and protects the lender from potential default. With PMI the minimum down payment you can make is 5% of the home value (depending on the size of the loan). You will automatically stop paying PMI when the loan-to-value ratio dips below 78%.

Some borrowers also use ‘piggyback’ loans as a substitute for mortgage insurance. This involves securing two separate loans, the first is a traditional mortgage for 80% of the home value and the second (the ‘piggyback’ loan) for an amount generally around 10% of the home value, meaning the borrower needs to contribute 10% as a down payment. The piggyback loan is subordinate to the first loan and requires a much higher interest rate. Because of the complexity of this loan structure, it is not as common as it used to be.

What are points?

Points, also known as Discount Points, are a form of pre-paid interest. In exchange for increasing the upfront payment to the lender you can reduce the interest rate on the loan and therefore the monthly payment you will make. As the purchase of points is a form of interest payment the expense is generally tax deductible.

What is amortization?

Amortization is the process by which your monthly principal payments reduce the outstanding amount of your mortgage and increase the equity value. Mortgages amortize over the length of their term to end at $0 when the mortgage is fully paid off.

What are the FHA loan limits?

To receive an FHA loan, your desired loan amount must be less than the specified loan limit in your area. These loan limits are set by the FHA and vary by county; higher cost-of-living areas tend to have higher limits. You can see these loan limits here: https://entp.hud.gov/idapp/html/hicostlook.cfm.

What are the VA loan limits?

The Department of Veterans Affairs sets limits on the size of VA loans, which vary by county; higher cost-of-living areas tend to have higher limits. You can see these loan limits here:
http://www.benefits.va.gov/HOMELOANS/documents/docs/2013_county_loan_limits.pdf

What is a conforming loan limit?

To receive a Conventional loan, your desired loan amount must be less than the specified loan limit in your area. These loan limits are set by the FHFA and vary by county; higher cost-of-living areas tend to have higher limits. You can see these loan limits here – FHFA Conforming Loan Limits

Mortgage Questions

What is a Mortgage?

A mortgage is a loan used to buy a home. You repay the loan, with interest, over a set number of years. The property serves as collateral, meaning if you don’t pay, the lender can take the home. Though you are a homeowner while paying the mortgage, it’s only once the mortgage is paid off that you own the home “free and clear.”

“Mortgage” can also refer to the legal document outlining the loan terms and permitting your lender to seize the home if you don’t repay the loan as agreed. In some states, this document is called a deed of trust.

» MORE: How to buy a house

How does a Mortgage work?

A mortgage lets you buy a home without paying cash. Mortgages typically require you to pay some money right away — called the down payment — and then repay the rest over time. Each month, you pay back some of what you borrowed, along with interest. Inability to repay the mortgage can lead to foreclosure. Mortgages also last much longer than other types of loans; 30-year mortgages are the most common.

You can get a mortgage from a mortgage lender, which includes banks, credit unions and nonbank lenders like Rocket Mortgage or Guaranteed Rate, which aren’t banks but do lend money. When deciding whether to give you a mortgage, a lender reviews every aspect of your finances, including your credit score, debts and employment. Lenders use this information to decide whether they’ll lend you money, how much they’re willing to lend and what the terms will be. Each lender’s qualifications can vary depending on the kind of home loan you want and other factors.

If you are buying a home with another person, you’ll be co-borrowers, and the lender will review both of your finances. A second borrower could help you qualify for a mortgage by increasing your total income or boosting your combined credit score.

» MORE: How to get a mortgage

What a mortgage payment includes?

You’ll pay back a mortgage on a monthly basis over a set number of years. Each month, you’ll pay some of the amount owed, as well as interest and potentially other costs. Here’s what’s included in a mortgage payment.

Principal

“Mortgage principal” means two things. It can refer to the original amount you borrowed. It also can refer to the amount you still owe after you have made payments.

For example, if you bought a $200,000 house and made a $20,000 down payment, you’d have originally borrowed $180,000. Each month, a portion of your mortgage payment is applied to your principal, reducing the total amount owed over time.

Interest

The interest rate on your mortgage determines how much you’ll pay the lender in exchange for borrowing the money.

Some of each monthly payment goes toward interest. In the first years of the loan, most of each payment covers interest and little goes toward principal; in the final years, most of the payment reduces principal. This process is called amortization.

Property taxes

Your lender may collect a portion of your property tax bill along with your mortgage payment and keep the money in an escrow account until the bill is due, paying it on your behalf at that time.

Homeowners insurance

Homeowners insurance — which can cover damage to your home from fires, storms, accidents and other catastrophes — is usually required by mortgage lenders. They may collect a portion of your premium as part of your mortgage payment and then pay the insurance bill out of your escrow account when it’s due.

Mortgage insurance

When you make a down payment of less than 20%, lenders typically require you to pay for mortgage insurance. Mortgage insurance premiums may be billed in your monthly mortgage statement.

Mortgage insurance protects the lender against the risk that you’ll default on the loan. There are two types: private mortgage insurance, or PMI, for conventional loans, and FHA mortgage insurance, which is required for home loans insured by the Federal Housing Administration. Private mortgage insurance can be canceled once you have enough home equity, but FHA mortgage insurance can last for the life of the loan.

» MORE: Calculate your mortgage payments, including PMI and taxes

Mortgage types

There are two kinds of mortgages.

Fixed-rate mortgage. The interest rate stays the same over time. The vast majority of home loans are fixed-rate mortgages.
Adjustable-rate mortgage, or ARM. The interest rate can change at intervals specified in the loan paperwork. Your monthly payment might increase or decrease as the interest rate changes.

» MORE: Comparing fixed-rate mortgages and ARMs

There are several types of loans, which may be either fixed-rate or adjustable. You’ll also be able to choose the loan term, or how long you’ll have to pay off the mortgage. Again, 30 years is the most common, but you’ll probably also see options for 20- and 15-year mortgages.

Conventional loans meet mortgage underwriting standards and conform to limits on loan amounts set by the U.S. government. These mortgages generally require a credit score of 620 or higher and a down payment of at least 3%.
FHA loans are insured by the Federal Housing Administration. Borrowers with credit scores as low as 580 may qualify for an FHA-insured mortgage with a down payment of at least 3.5%.
VA loans are guaranteed by the Department of Veterans Affairs and do not require a down payment. VA loans are available to qualified U.S. veterans, active-duty military personnel and some surviving spouses.
USDA loans don’t require a down payment and are available to homebuyers who meet income requirements in designated rural and suburban areas. They are guaranteed by the U.S. Department of Agriculture.
Jumbo loans are mortgages that exceed the government’s limits on loan amounts. The limits vary by county, and they’re higher where housing is more expensive.

» MORE: Summary of mortgage types and programs

Mortgage terminology to know

There’s a lot of vocab to learn when you’re looking for a home loan. To make things even trickier, in many cases these are specialized uses of everyday words. Here are some terms you might come across.

APR. APR is short for annual percentage rate. This number represents the total cost of borrowing money to buy a home because it combines your interest rate with fees, points and other lender charges. Looking at the APR different lenders offer gives you another way to compare costs.

Appraisal. After you have applied for a mortgage, the lender has an appraiser compare the details of the home you want to buy with similar properties that have recently sold in your area. This tells the lender the property’s value, which is important because it won’t let you borrow more than the home is worth.

Closing. Closing has two different but related meanings when it comes to buying a home. It can refer to the time between applying for a mortgage and actually signing the paperwork and receiving the keys, or it can refer to that last day when the loan “closes.”

Loan Estimate. The Loan Estimate is a document that you’ll get when you are preapproved for a mortgage. It shows all the costs related to getting a home loan, including rates and fees. The Loan Estimate also shows which costs are set in stone and which you can shop around for. All lenders have to use the same format, which makes Loan Estimates easy to compare.

Mortgage broker. A mortgage broker is an independent agent who can help you with the home loan process. Based on your needs, they’ll present you with loan options and help you work with the lender that you choose. You don’t have to work with a mortgage broker. With the amount of information readily available online, it’s easier to do research and compare loans than it used to be.

Mortgage originator. A mortgage originator is the lender that initially provides your home loan. You’ll work with the mortgage originator from your initial application through closing day.

Mortgage servicer. A mortgage servicer is the company that handles your mortgage once you own the home. You send the servicer your monthly payment, it manages your escrow account and you’ll call it with any questions about your home loan. In some cases, your mortgage originator will also service the mortgage, but most of the time, originators resell mortgages to servicers.

Second mortgage. A second mortgage is another loan on a home that already has a first, or primary, mortgage. Also called “junior liens,” second mortgages are a way to access the equity in your home as spendable funds without selling or refinancing. Home equity loans and home equity lines of credit are two types of second mortgages.

Points. Sometimes called mortgage points or discount points, points are optional fees that you can pay when buying a home in order to reduce your interest rate. One point usually costs 1% of the total amount you’re borrowing, and for each point you buy, the lender reduces your interest rate by 0.25 percentage point. When you’re comparing interest rates, check whether points are included — sometimes lenders will add points to their sample rate calculations to make their interest rates appear lower.

Preapproval. A mortgage preapproval is a letter from a lender stating how much they might be willing to lend you to buy a home. A preapproval doesn’t mean that you’ll definitely get the loan, but because it’s based on the lender verifying some of your financial information — including doing a credit check — a preapproval shows real estate agents and home sellers that you’re a legit buyer.

Prequalification. A mortgage prequalification is a more informal way to estimate how much you might be able to borrow to buy a home. You provide a lender with basic information like your income and credit score range, and they’ll tell you what kinds of loans you could be able to get. Since the lender doesn’t independently verify any of your financial info, a prequalification doesn’t carry as much weight as a preapproval.

Title. The title represents the home’s ownership history. If a home has a “clear title,” that means that the current owner has the right to sell the property and no one else can make a claim to it. Title issues can crop up if there are judgments against the property owner (for example, unpaid taxes). Getting a title search is part of the closing process.

Underwriting. Underwriting is the process lenders use to make sure that borrowers are qualified. It happens after you apply for a mortgage, and it can last for weeks. During this time, an underwriter will look closely at your finances, plus examine the house’s appraisal and the title search, to make a final determination as to whether to give you a mortgage. Once the underwriter gives the go-ahead, you’ll get the Closing Disclosure (a finalized version of the Loan Estimate) and be able to schedule the closing.

Mortgage FAQ

How can I find out how much home I qualify for?

You can use our online prequalification toolto connect with a loan officer and find out approximately how much you can borrow before you start shopping for a house.
Once you have that number, you can provide more information and allow your loan officer to run your credit report to verify your assets and income.
Your loan officer can also help you obtain a complete written credit approval, subject to an appraisal, before you make an offer on a house.

Keep in mind that there’s a difference between being preapproved and prequalified.

When you’re prequalified, you’ve given your mortgage lender all the basic info they need to help you determine what loan program and what amount you may prequalify for. When you’re preapproved, your lender will have collected the necessary documents and verified your information to move the loan forward to underwriting and approval.

Prequalification can be done easily, quickly, and online. To take the next step and to get preapproved, you may be asked for:

Tax returns and W-2 forms from the most recent two years.
Bank/asset statements from the most recent two months.
Paystubs from the last 30 days.
Valid photo ID.

But remember, by furnishing any and/or all of this documentation, you are in no way obligated to accept the terms and conditions of the mortgage offered, nor do you have to provide these documents to receive a Loan Estimate (LE).

Is there anything I shouldn’t do before I get prequalified?

Don’t start shopping for a new home until you’ve been prequalified.
Don’t pack or ship any important documents, such as tax returns, bank statements, paystubs, and W-2s.
Don’t suddenly pay off all your debts.
Don’t apply for new credit cards.

Prequalifying for your home loan before you begin shopping for a house can save you hours of unneeded stress and heartache. When you know how much house you can afford in advance, you can meet with your realtor, well-informed and ready to make an educated buy. In eyes of a seller, a prequalified homebuyer also appears more motivated.

Likewise, holding on to your paystubs, bank statements, and tax returns can make a speedy prequalification even speedier. To further grease the wheels and keep your loan process moving, make all your bill payments on time. It also helps to have a paper trail of any large deposits you make, as well as to notify your loan officer directly if you plan to use a down payment gift from your family.

Again, prequalification can be easy, but it’s after you get preapproved and the loan process progresses that your lender is required to pull a refreshed credit report before closing to check for any new debt. So, any major changes in your finances could delay your loan closing – or even result in a denial despite an earlier approval.

*Avoiding these actions before and during the financing process can prevent any unnecessary confusion.

How can you keep your credit clear while your new home loan is in the works? Don’t do this:

Apply for a new credit card, auto loan, or other types of credit.
Co-sign a loan with someone.
Change jobs, become self-employed, or quit your job.
Skip payments on existing credit accounts, utility bills, or loans.
Charge up your existing credit on big-ticket items, like furnishings for a new house.

If you think any of these don’ts are musts, talk to your loan officer before you take action. They can help you figure out what to do so that your mortgage loan is the least negatively affected.

*Avoiding these actions before and during the financing process can prevent any unnecessary confusion.

What are income and debt ratios?

Income ratio:Your total monthly housing expense divided by your pre-tax monthly income.
Debt ratio:Your total monthly housing expense plus any recurring debts, i.e., car payments, monthly minimum credit card payments, and other loan payments, divided by your monthly income.
Standard loan underwriting guidelines suggest a max 28 percent income ratio and 36 percent debt ratio, which may vary based on personal finances, loan program, and down payment.

While not taking on any debt and paying for everything with cash seems like a logical choice if you feel you can’t afford your lifestyle, no credit also means bad credit in the eyes of a lender. There’s bound to be a time when you can’t buy something with cash, like buying a house (in most cases). So, we recommend opening at least three credit card accounts and making occasional purchases.

To manage your debt and maintain healthy credit, keep credit card balances to less than 30 percent of your credit limit. Also, don’t close long-term credit lines, even if they’re not being used. Your longest-standing credit card account might be a huge contributor to your credit score health — and the mortgage rate you qualify for.

What are cash reserves?

Cash reserves:The extra funds available to you after your loan closes.
These funds reflect your ability to make monthly mortgage payments, and different loan programs may have different cash reserve requirements.

To estimate your ability to pay your monthly mortgage, we recommend setting aside about 28 percent of your monthly income. This number factors into your debt-to-income ratio, mentioned above.

For many people, any number between 25 and 32 percent of your income is manageable. But, relying on a higher percentage of your monthly income could put you at risk if you have a big financial change, like rising insurance costs or loss of employment.

What is mortgage insurance?

This insurance helps protect a lender if a borrower forecloses on their property.
Borrowers pay for the mortgage insurance, allowing lenders to grant loans they might not have otherwise.
Mortgage insurance may be required on some loans when a down payment is less than 20 percent.

Mortgage interest, insurance paid, and property taxes are normally tax-deductible for your principal residence. As confirmed by TurboTax, buying a house is an investment, but the tax deductions may be large enough to lower your tax bill “substantially.” Interest/insurance payments on a residential mortgage (as well as mortgage interest/insurance on a second home) may be fully deductible.

Likewise, selling one home and buying another means you might be able to protect the profits on the sale of your home, as long as it was used as a principal residence for any two of the last five years.

You could protect up to $500,000 in tax‐free profit when filing federal taxes jointly or $250,000 when filing single. This added bonus of tax‐sheltering the profits on the sale of your home may be available to you once every two years. Homeowners who take advantage of these deductions could save hundreds of dollars in annual taxes.

What are mortgage points?

Also called discount points, mortgage points work as a one-time fee you can opt to pay if you’d like to get a lower interest rate.
One mortgage point equals one percent of your total loan amount and may drop your interest rate one-eighth to one-quarter percent lower.

You may have noticed by now that lenders charge their own fees, which can vary greatly. One lender may choose to waive a fee but add on another. Another lender might quote an interest rate before adding or subtracting discount loan points that can change the total cost of a mortgage.

You can determine if you’re getting a good deal on a loan by comparing the cost of some of the most common lender fees:

These loan fees may seem like small potatoes compared to the ever-important interest rate, but they’re a great indicator for finding a good mortgage loan from a fair lender. Lenders are also required to provide a free written fee estimate for any of the costs listed above.

What’s an APR?

Annual Percentage Rate: The cost of your total loan credit calculated into an annual interest rate, also called APR.
The APR includes loan points and other prepaid finance charges to reflect the true yield on the loan, which is why the APR is normally higher than a loan interest rate.
To check that you’re getting the most competitive loan, you can compare “apples to apples,” or APR to APR, on different loan programs.

After you’ve applied for a home loan, you can expect to receive a Loan Estimate (mentioned above) from your lender. If you applied for more than one type of loan, an LE will be broken down for each loan type. The APR for a loan will be listed on page 3 of the LE, in the comparison section.

Most of the time, you’ll notice the difference between your APR and your loan interest rate right away. An APR is often higher than an interest rate because of added fees.

An APR is essentially a comparison tool. Interest rates, loan fees, and points may be all over the map. But, the APR can always be used to accurately compare multiple loan products. And in cases where an interest rate looks a little too attractive, the APR can tell you the real story.

You can use this handy trick to separate the good from the bad when choosing a mortgage: Compare a loan’s APR to its advertised interest rate. An APR that’s noticeably higher than the interest rate may be a red flag that added costs are attached to the loan. Your loan officer can also help you compare and better understand loan fees.

Can I still get a mortgage if I have bad credit or have filed bankruptcy?

Having good credit helps to get a more competitive mortgage interest rate, but perfect credit isn’t required.
If you have a low credit score or have filed bankruptcy in the past, you can work toward improving your credit.

When in doubt, contact your loan officer. At Cornerstone, we’ll do whatever we can to help you buy a home, even with spotty credit.

Don’t let something as intimidating as a credit score keep you away from the information you’re entitled to. Checking your free credit report yearly, available from one of the three nationwide credit reporting agencies, can help you to keep tabs on your financial status — which becomes especially important when you’re buying a house.

Yearly credit checks can also help you catch any problems that pop up early on, like mistakes on your credit report or instances of fraud.

Once you get your annual report back, here’s how to understand your FICO score, ranging from 300 on the low end to 850 on the high end. There are five factors that make up your credit rating:

Types of credit:Taking out a variety of credit lines, like credit cards, a car loan, and other credit accounts, could increase your score. FICO score impact: 10 percent.
New credit accounts:On the other hand, having a lot of credit inquiries could lower your credit score — with the exception of home and auto loan inquiries that may be lumped together as one inquiry within a 30-day period. FICO score impact: 10 percent.
Length of credit history:It’s not necessarily bad to have a short credit history, if you’ve been handling your money well. And having one or two good credit accounts is better than having no credit at all. FICO score impact: 15 percent.
Payment history:Delinquent and overdue bills can lower your credit score. FICO score impact: 35 percent.
Outstanding balances:Keeping the amount you owe to creditors to under 30 percent of your credit limits shouldn’t affect your credit score. FICO score impact: 30 percent.

This bears repeating — your credit score matters when you’re trying to buy a house. Your credit score has a direct impact on your mortgage interest rate. A great score could qualify you for the lowest available interest rates, compared to a poor score that might make it harder to get a loan.

Talking to your loan officer about how you can fix some blemishes in your credit score is well worth the time and effort to get a lower rate. Lowering even one percentage point on a mortgage could save you thousands over the long-term.

I just got a new job. How does this impact getting a mortgage?

Most loan programs are looking for a two-year job history in the same field — though changing jobs to move to a better position could be seen as favorable.
For recent college grads, you may still be able to get a home loan without a two-year work history.

If you’ve recently transitioned from conventionally employed to self-employed, you may need five more documents to complete your mortgage approval:

1099 for the last two years.
Form 1120S or K1.
Both personal and business full tax returns for the last two years.
Proof of self-employment.
Current balance sheet and profit/loss statement.

If you receive retirement or disability income, you may need five additional documents for home loan approval:

Pension award letter.
Social Security award letter.
Supplemental Security Income (SSI) benefits.
Permanent disability award letter.
Recent retirement account statement.

Can I “lock in” my interest rate?

Yes! Get in touch with your loan officer, and they can lock in the interest rate you were quoted.
You’ll be provided with a written Rate and Price Determination Agreement, detailing interest rate, loan terms, and time period for the rate lock.
You could use a rate shield to lock your rate for up to 270 days, with the option to float down to a lower rate if rates drop within 45 days of closing.**

You can use a handy app to get prequalified for a mortgage and get a rate quote based on your individual financing needs and specific loan requirements. This interest rate quote is customized. So, it’s tailored to your individual profile and financial situation. The rates reported in the media are source material. Oftentimes, those rates may be expired by the time you read about them.

Once you’re prequalified and receive your rate quote, make sure you get a full, written term sheet that shows the interest rate, loan term, total monthly payment (including insurance and taxes), total cash-to-close, and line item list of closing costs before you lock your rate with a lender.

What’s prepaid interest?

Just like it sounds, prepaid interest on a mortgage is paid in advance.
For most mortgages paid on the first of the month, you’re paying for interest accrued the previous month.
Depending on when you close, you may pay prepaid interest that has accrued for the days left in the month — the interest accumulated from May 15 to May 31, for example.

In some cases, your lender may recommend a no-cost home loan to keep upfront costs as low as possible. As a borrower, you won’t have to pay any loan points, closing costs, or fees for credit reports, appraisals, and other lender charges normally lumped in at closing. This may look like opting to add your closing costs on to the total amount of the loan.

Or, you may opt to increase the interest rate on your loan by three-eighths to seven-eighths of a percentage point, depending on the loan amount. If you have a larger loan, you’ll see a smaller increase. For example, instead of paying a 3.5 percent interest rate and $2,500 in closing costs, you’ll pay nothing at closing with an increase to a 4 percent interest rate.***

When asking about interest, take a moment to talk to your loan officer about other out-of-pocket expenses, like down payment, closing costs, and loan-related fees. Additional expenses that come with buying a house may include: taxes, homeowners’ association dues, utilities, homeowner’s insurance, and any home improvements you intend to make.

What are closing costs?

The extra costs paid at closing may include attorney fees, prepaid interest, insurance fees, documentation fees, and more.
Closing costs may vary by borrower based on your mortgage loan type, property location, and other factors.
You can find your closing costs broken down in your Closing Disclosure, provided by your loan officer at least three business days before your expected closing date.

Closing costs may range from 2 to 5 percent of your purchase price. The buyer and the seller are both responsible for paying different costs at closing.

Closing costs paid by the buyer:

Half of title and escrow fees — such as title insurance, transfer taxes, notary fees, and more.
Lender fees — to cover the act of obtaining a mortgage, including the appraisal.
Homeowner’s insurance — normally, the first year of hazard or homeowner’s insurance is paid upfront on closing day.
Additional costs paid by the buyer may include the owner’s title insurance, inspection fees, earnest money, RE Brokerage admin fees (if applicable), and credit report fees.

Closing costs paid by the seller:

Half of title and escrow fees — such as title insurance, transfer taxes, notary fees, and more.
Commissions — estimated at around 5 to 6 percent for the average real estate commission.
Loan payoff — to cover any outstanding mortgage balances.
Additional costs paid by the seller may include optional home warranty, prorated property taxes, RE Brokerage admin fees, pest or septic inspection, and prorated HOA fees, if required.

Buyers, you can also ask a seller for closing cost assistance as part of your offer on a house. It also helps to do your homework before closing day so that you don’t sit down at the table unprepared. Review your Closing Disclosure, which you should receive three days before closing. Check over the charges, compare it to your Loan Estimate, and clear up any inconsistencies with your lender.

What should I bring to closing?

At closing, which normally takes place at the title company, you and any other borrower listed on your mortgage agreement will need to bring in a valid driver’s license.
Any funds required at closing must be brought as a wire transfer or cashier’s check made out to the title company.

Closing is the final step in the homebuying process. A closing might also be called a settlement, where you and any other parties sign all necessary documents to complete your mortgage transaction. Sign these documents, and you take ownership of your home loan. You’ll then be the proud owner of a new house.

Leading up to closing, consider downloading an app to make things easy. Our free LoanFly app has an exclusive and secure Borrower Portal that you can use to upload documents and track your loan’s status from anywhere. This leaves you with a lot less paperwork to worry about on closing day.

When will I get my money?

You’ll have access to your funds on the day you close on your loan — when you’ve officially bought a house.

Congratulations on closing: This is a big deal. And remember, moving to a new home because of a job transfer or change might qualify you for a moving expense deduction, in some states.

To get the break, the distance between your old home and new job must be at least 50 miles more than the distance between your old home and your old job. If you qualify, you’ll get to deduct the cost of moving your belongings and the expense of moving you and your family, including lodging but not meals.

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