When you are in the market for a home, there are a million things to consider. You have to figure out how much home you can afford, find the neighborhood that suits your needs, search for the perfect home, and find the right bank to make it all happen. When you are working on your budget for purchasing your home, aside from the amount you will need to have for a down payment on the home, you will also need to have funds ready to pay for closing costs.
How much will my closing costs be?
Typically closing costs will be between 2 – 5% of the purchase price of the home. So if the home you are planning on purchasing has an asking price of $200,000, your closing costs will run between $4,000 and $10,000. However keep in mind this is only an average, they can run as little as 1% and as high as 8%.
What am I paying for?
The closing costs typically fall within the 2-5% range, but that doesn’t mean that lenders pick a random percentage and charge that. Closing costs are various fees charged by those involved in the closing of the home. The fees can include:
- Credit report fee
- Loan origination fee (a paperwork processing fee)
- Appraisal fee
- Survey fee
- Attorney's fees
- Inspection fees
- Title search fees
- Title insurance
- Escrow deposit
- Mortgage Tax
- PMI (private mortgage insurance, if applicable)
- Recording fees
- Discount points
- LLPA (Loan level pricing adjustments)
What is an LLPA?
An LLPA is a Loan Level Pricing Adjustment charged to the lender by Fannie Mae or Freddy Mac to balance the risk associated with a particular loan. So if you have a credit score that is less than stellar or if you are purchasing a condominium instead of a house, the lender will tack on fees to level the risk playing field. Let’s take a look at a specific example using our home with a $200,000 asking price. If you are making a down payment of $40,000, that means you are asking for 80% financing. If you have a credit score of 685, you would be charged a LLPA of 1.75% which is an additional $2,800 due at the closing table. Using the same purchasing scenario, if you are buying a condo, your LLPA fee would be an additional .75%, ($1,2000), making a total of $4000 LLPA costs due at closing. As you can see, those costs can add up quickly.
Why we are different
We do not charge Loan Level Pricing Adjustments. All of our loan approvals occur in-house. Our loan committee sits together and discusses the applicant and the property and then makes a decision whether or not to grant the loan. This streamlined process and face to face interaction allows us to have lower closing costs. If you have applied for a loan elsewhere but are still shopping, we would encourage you to bring us your Good Faith Estimate. We would be happy to review it with you and show you how we can save you money on closing costs.
What is a GFE?
GFE stands for Good Faith Estimate and all lenders are required by law to prepare one for you within three days of your loan application. A GFE is not a guarantee of the closing costs; it is merely an estimate of what the closing costs are projected to be at closing. Legally, the estimates can change by as much as 10% which can make a big difference in the cash you will need to have on hand at the closing table.
Wallkill Valley Federal Savings & Loan wants to help make your dreams of homeownership a reality. Our streamlined loan process and in-house approvals allow for lower closing costs than our competitors. Do you have a Good Faith Estimate from another lender? We encourage you to bring us a copy. Melissa Flickenschild (NMLS# 524987), our Senior Residential Loan Officer, would be happy to review it with you and show you how we can save you money. Give her a call at 845-895-2051 or email her at email@example.com.
NMLS # 404992
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