mortgage loan

The No-Cost Thirty Year Fixed Rate Mortgage

The No-Cost Thirty Year Fixed Rate Mortgage

There really is no such thing as a “no-cost” mortgage loan. There are always costs, such as appraisal fees, escrow fees, title insurance fees, document fees, processing fees, flood certification fees, recording fees, notary fees, tax service fees, wire fees, and so on, depending on whether the loan is a purchase or a refinance. The term “no-cost” actually means that your lender is paying the costs of the loan. All a “no cost” loan means is that there is no cost to you, the borrower.

Except that you pay a higher interest rate.

Understand How Loans Are Priced

A variation of the no-cost loan is the “no points” loan, or even the “no points, no lender fees” loan. On these loans you pay all the costs associated with buying a house or refinancing, but you do not have to pay the lender associated fees or points. However, since lenders and loan officers do not do anything for free, the profit has to come from somewhere.

So where does it come from?

First, you have to understand how loans are priced and how mortgage lenders and loan officers earn income. Each morning mortgage companies create rate sheets for loan officers. The rates usually change slightly from day to day. In volatile markets they change several times a day. On the rate sheet, there are many different programs, including the thirty year fixed rate.

There will be one column which will lists several different interest rates and another column that lists the “cost” for that particular rate. For example:

Rate Cost(points)

====== =============

6.250% 2.000

6.375% 1.500

6.500% 1.000

6.625% 0.500

6.750% 0.000

6.875% (0.500)

7.000% (1.000)

7.125% (1.500)

7.250% (2.000)

In the above example, 6.75% has a “par” price, which means it has a zero cost. The lower in rate you go, the higher the cost, or “points.” A point is equal to one percent of the loan amount. The parentheses in the cost column for the higher interest rates indicates a negative number. For example, (1.500) equals -1.500, which means instead of having a cost associated with the loan, the lender is willing to pay out money for those interest rates. This is called “premium” or “rebate” pricing.

– Zero Cost Loans –

How Mortgage Companies and Loan Officers Make Money

The above rate sheet is not a rate sheet designed for public review. In fact, most lenders have a policy that the public cannot see their internal rate sheet. This rate sheet is designed for loan officers and the cost column is the loan officer’s cost, not the cost to the borrower. When the loan officer quotes you an interest rate, he will add on a certain amount, usually one to one and a half points. Most companies leave it up to the loan officer’s discretion how much to add on to the base cost. However, they usually require at least a minimum add-on, which is usually one point.

The loan officer’s commission depends on his “split” with the company and can vary. He receives a portion of the add-on and the rest goes to the company.

If we assume the loan officer is adding on one point, and you were willing to pay one point for your loan, then your rate would be (according to this rate sheet) 6.75%. You would pay one percentage point and receive an interest rate of six and three-quarters. If you wanted a lower rate and were willing to pay two points, you could get six and a half percent. If you wanted a “no points” loan, then your rate would be seven percent. The loan officer and the mortgage company would split the one point rebate, listed as (1.000) on the rate sheet.

See how it works?

In addition to the cost noted on the rate sheet above, lenders have certain other fees they like to collect, too. These can include document fees, processing fees, underwriting fees, warehouse fees, flood certification fees, wire transfer fees, tax service fees, and so on. Usually, you will not be charged all of these fees, it is just that different lenders call them different things. Some of them are legitimate costs to the lender and some of them are simply fees designed to generate additional income to the mortgage company. They are customary in today’s mortgage market and can vary from around $600 to $1300. In addition, there will usually be an appraisal fee and a credit report fee. Appraisals and credit reports are usually contracted out to independent companies even though these are considered to be lender fees.

Note that it is common for companies who charge higher fees to have a slightly lower interest rate and companies that charge lower fees will usually have a slightly higher interest rate. So if you shop entirely based on fees, you may actually spend more money in the long run because your interest rate may be higher.

The point is that if you want a “no points – no lender fees” loan, then on our rate sheet above, you may get an interest rate of 7.125%. That is because the loan officer has to bump the interest rate even further than on a “no points” loan in order to cover his own company’s fees.

If you want a “no cost” loan, then the loan officer has to bump your interest rate even further. That is because all of the costs on your purchase or refinance do not come from the lender. The escrow or settlement company involved in your transaction will charge a fee which must be paid. The lender will require title insurance and the title insurance company charges a fee for providing this insurance. If your new lender requires information from your homeowner’s association (if you have one) then the homeowner’s association will most likely charge a fee for providing those documents. If you are refinancing, your current lender will usually charge at least two fees: a “demand” fee, and a “reconveyance” fee. The demand fee is charged simply for providing payoff information. The reconveyance fee is charged because your current lender prepares a document which releases your property as collateral for their outstanding loan. This document is called a reconveyance.

These charges will add about another point to how much the loan officer must collect in premium pricing in order to cover the costs associated with your refinance or purchase. For a zero cost loan, he will normally need to collect somewhere in the neighborhood of two and a half points. Because points are a percentage of your loan amount and most of the costs are fixed, it takes fewer points to provide zero costs on higher loan amounts. On smaller loan amounts it takes more. One percent of $200,000 is two thousand dollars and one percent of $100,000 is only $1000, so you can see how it is easier to cover costs on larger loans.

Does it makes sense to do a zero cost loan?

On a $200,000 thirty year fixed rate loan, the difference in monthly mortgage payments will be about $87, using the example rate sheet on the first page. Over thirty years, it works out that you will pay more than $30,000 extra for getting a zero cost loan. So if you intend to remain in the home for a long period of time it just doesn’t make sense.

Suppose you intend to stay for only five years? On a purchase, using the $200,000 example, if you stayed longer than fifty-five months, it would make more sense to pay your own costs and get the lower interest rate. If you kept the loan for a shorter time, then it makes more sense to pay zero costs and get a higher interest rate.

Except for one thing.

If you knew you were only going to be staying in the home for five years you would probably not want a thirty year fixed rate, anyway. You would get a loan which has a fixed payment for the first five years, then convert to an adjustable or whatever fixed rates are five years from now. These loans have an interest rate almost a half percent lower than thirty year fixed rate loans. Since it is practically impossible to do a zero cost loan on this type of loan, you would have to compare a zero cost thirty year fixed rate loan to paying points on a loan with a fixed payment for five years.

The difference in payments would be about $150. The two and a half point rebate equals $5000. Working out the math, if you stayed in the home longer than thirty-three months, it would make more sense to pay the points and get the loan with the five year fixed rate.

Finally, carry the discussion one step further. Suppose you know you are going to be in the new loan for less than three years? Doesn’t it make sense to get a “zero cost” loan then?

No.

Then you get an adjustable rate loan. As long as the start rate is two percent lower than the current fixed rate, you cannot lose. The first year you will save a lot of money. The second year you will probably break even. The third year, you will probably give up some of the savings from the first year, but not all of them.

“Zero cost” loans just don’t make sense for Homebuyers.
But they sound really good in an advertisement.

Exceptions:

• On a FHA Streamline Refinance Without an Appraisal (not a purchase – which is what the article talks about), it makes sense to do a zero cost loan. This is mostly because the new loan has to be exactly the same amount as the existing balance of the current loan.

• If the Homebuyer only has enough money for down payment and none to cover closing costs, PLUS no arrangement can be made for the seller to pay closing costs, then zero costs may make sense (however, I would still recommend negotiating terms with the homeseller – be willing to pay a higher price in exchange for the seller paying your costs)

mortgage loan

Which ARM is the Best Alternative?

Which ARM is the Best Alternative?

How would you like a mortgage loan where you did not have to make the whole payment if you did not want to? Or would you like a loan with an interest rate about one percent below a thirty-year fixed rate mortgage and pay zero points? Or a loan where you did not have to document your income, savings history, or source of down payment? How would you like a mortgage payment of only 2.95 percent? You can have all that with the 11th District Cost of Funds (COFI) Adjustable Rate Mortgage.

Sound too good to be true? Sound like a bunch of hype?

Each statement above is true. However, it is also only part of the story and loan officers do not always tell you the whole story when promoting this loan. Then other loan officer try to scare you away from the adjustable rate mortgages. However, once you become aware of all the details of the loan, it is an excellent way to buy the house of your dreams, especially when fixed rates begin to go up.

ARMs in General

Adjustable rate mortgages all have certain similar features. They have an adjustment period, an index, a margin, and a rate cap. The adjustment period is simply how often the rate changes. Some change monthly, some change every six months, and some only adjust once a year. Indexes are simply an easily monitored interest rate that moves up and down over time. Adjustable rate mortgages have different indexes. The margin is the difference between your interest rate and the index. The margin does not change during the term of the loan.

So if you have an adjustable rate mortgage and you wanted to calculate your interest rate on your own, all you have to do is look up the index in the paper or on the internet, add the margin, and you have your rate.

Indexes and the 11th District

The “Prime Rate” you hear about in the news is one interest rate index, although it is very rare that mortgages are tied to this index. It is more common to find adjustable rate mortgages tied to different treasury bill indexes, the average interest rate paid on certificates of deposit, the London Inter-Bank Offered Rate (LIBOR), and the 11th District Cost of Funds. Currently, the Cost of Funds Index is the lowest of these indexes, though this is not always true.

To simplify, the 11th District Cost of Funds (COFI) is the weighted average of interest rates paid out on savings deposits by banking institutions in the the 11th district of the Federal Home Loan Bank (FHLB), which is located in San Francisco. The 11th District includes the states of California, Nevada, and Arizona.

The COFI index moves slower than the other indexes, making it more stable. It also lags behind actual changes in the interest rate market. For example, when rates begin to go up, the COFI index may continue to decline for a couple of months before it also begins to rise. However, when interest rates start to decline, the COFI index may continue to go up for another couple of months, too. It lags behind the market.

The Margin and Interest Rates

The margin on the COFI ARM can be on either side of 2.5%. For example the COFI index as of July 31, 1998 is 4.504%. With a margin of 2.44%, your interest rate would be 6.944%. During this same time, thirty year fixed rate loans on conforming mortgages are close to eight percent. Fixed rates on jumbo loans (above $240,000) are higher.

Monthly Adjustments Sound Scary, but…

Although you can get a COFI ARM with an adjustable period of six months, you can get a lower margin if you go for the monthly adjustment period. Since the margin plus the index equals your interest rate, the lower margin is an advantage and most people choose the monthly adjustment.

Monthly adjustments sound scary to the uninitiated, but keep in mind that this is a slow moving index. Most other ARMS have an annual cap of two percent a year. Since 1981, when the FHLB began tracking the index, the most it has moved during any calendar year is 1.6%. So why get a higher margin just to get a rate cap that you probably will not use anyway?

The “life-of-loan” cap for the COFI ARM is usually 11.95%. The most recent year that this cap could have been reached was 1985. Plus, most experts do not expect a return to the interest rates of the early 1980′s when interest rates were pushed up artificially to combat the inflation of the 1970′s.

Make Only Part of Your Payment?

This is the really interesting feature of the loan. You do not have to make the whole payment. Each month you get a bill that has at least three payment options. One choice is the full payment at the current interest rate. A second choice allows you to pay only the interest that is due on the loan that particular month, but does not pay anything towards the principal. Finally, the third option gives you the choice to pay even less than that and is called the “minimum payment.”

The minimum payment when you start your loan can be calculated as low as 2.95 percent. Keep in mind that this is not the note rate on your loan, but just a way to calculate your minimum payment.

Deferred Interest and Amortization

Of course, if you only make the minimum payment each month, you are not paying all of the interest that is currently due that month. You are deferring some of the interest that is currently due on the loan and you will pay it later. The lender keeps track of this deferred interest by adding it to the loan and the loan balance gets larger. Neither you nor the lender wants this to continue forever, so your minimum payment increases a bit each year.

The payment cap on the loan is 7.5%, which also has nothing to do with the interest rate. All it means is the most your minimum payment can increase from one year to the next is seven and a half percent. For example, if your minimum payment is $1000 this year, next year the most it could be is $1075. This continues each year until your payment is approximately equal to the payment at the full note rate.

Just in case, there are fail-safes built into the loan. If you continue making the only the minimum payment and your current balance ever reaches 110 percent of the beginning balance, the loan is re-amortized to make sure you pay it off in thirty years (or forty years, whichever option you chose). Every five years the loan is re-amortized to make sure it pays off within the term of the loan.

Stated Income and Other Features

Many COFI lenders allow Homebuyers with good credit to apply without documenting their income, assets, or source of down payment. Of course, you have to make a twenty or twenty-five percent down payment on your home purchase. This is helpful for self-employed borrowers or those who have jobs where it is difficult to document their income. Plus, some people just do not like the bother of supplying W2 forms, tax returns and pay-stubs. Anyway, it makes for a quick and easy loan approval.

Sub-Prime COFI ARMs

Some people have less than perfect credit and they are used to being charged outrageous rates for past problems. Some COFI lenders offer this same loan but have a slightly higher starting payment and a higher margin. The end result is that your interest rate would be about one percent higher. As of August 18, 1999, that would be around eight percent on this loan instead of seven percent.

Who Should Get This Loan?

In my personal experience, most people who get the COFI ARM are purchasing a home between $300,000 and $650,000, but it is not limited to that. It is a real favorite of those working in the financial industry and those with higher incomes. One reason they like it is because they consider any deferred interest to be an extended loan at a very attractive rate. By making the minimum payment, they do other things with the money.

Homebuyers whose income has peaks and valleys, such as self-employed or commissioned salespeople also like the loan, because it provides flexibility in the monthly payment. During a slow month they can make the minimum payment if they choose. Another reason borrowers like the loan is because it allows for tax planning. The borrower can defer interest payments and at the end of the year, analyze their tax situation. If it serves their tax interests, they can make a lump sum payment toward any interest that has been deferred and deduct it for tax purposes.

Skipping the Starter Home or Move-Up Home

If you’re buying a home with the intention of living in it for only a few years before you move up to a bigger home, the COFI ARM makes sense, too. With this loan and its low start payment you can often qualify for a larger home than you can when applying for a fixed rate loan. This allows you to skip the intermediate purchase and move up immediately to the home you really want, which makes more sense and saves you money.

If you buy a home, then sell it to move up to a bigger home, you are going to have to pay Realtor’s commissions and closing costs. On a $300,000 house, this would be around $25,000. If you skip buying that home and buy the home you really want, you save that money. Plus, you save money in another way. Say you live in your intermediate purchase for five years, then move up and buy another home with another thirty year mortgage. That is thirty-five years of home loans. If you buy your ideal home now, you save five years of mortgage payments. Depending on your loan amount, that can be a lot of cash.

Conclusion

So, when rates start going up this is an attractive alternative to fixed rates. It even makes sense for some borrowers when rates are low. Something we also did not mention is that most COFI lenders also give you a fourth option on your monthly mortgage statement which allows you to pay it off quicker.

mortgage loan

Closing Costs When Buying or Refinancing a Home

Closing Costs When Buying or Refinancing a Home

This is a detailed summary of costs you may have to pay when you buy or refinance your home. They are listed in the order that they should appear on a Good Faith Estimate you obtain from a mortgage lender. There are two broad categories of closing costs. Non-recurring closing costs are items that are paid once and you never pay again. Recurring closing costs are items you pay time and again over the course of home ownership, such as property taxes and homeowner’s insurance. Some of the items that appear here do not traditionally appear on a lender’s Good Faith Estimate and lenders are not required to show all of these items.

Non-Recurring Closing Costs Associated with the Lender.

Loan Origination Fee – The loan origination fee is often referred to as “points.” One point is equal to one percent of the mortgage loan. As a rule, if you are willing to pay more in points, you will get a lower interest rate. On a VA or FHA loan, the loan origination fee is one point. Anything in addition to one point is called “discount points.”

Loan Discount – On a government loan, the loan origination fee is normally listed as one point or one percent of the loan. Any points in addition to the loan origination fee are called “discount points.” On a conventional loan, discount points are usually lumped in with the loan origination fee.

Appraisal Fee – Since your property serves as collateral for the mortgage, lenders want to be reasonably certain of the value and they require an appraisal. The appraisal looks to determine if the price you are paying for the home is justified by recent sales of comparable properties. The appraisal fee varies, depending on the value of the home and the difficulty involved in justifying value. Unique and more expensive homes usually have a higher appraisal fee. Appraisal fees on VA loans are higher than on conventional loans.

Credit Report – As part of the underwriting review, your mortgage lender will want to review your credit history. The credit report can be as little as seven dollars, but normally runs between $21 and $60, depending upon the type of credit report required by your lender.

Lender’s Inspection Fee – You normally find this on new construction and is associated with what is called a 442 inspection. Since the property is not finished when the initial appraisal is completed, the 442 inspection verifies that construction is complete with carpeting and flooring installed.

Mortgage Broker Fee – About seventy percent of loans are originated through mortgage brokers and they will sometimes list your points in this area instead of under Loan Origination Fee. They may also add in any broker processing fees in this area. The purpose is so that you clearly understand how much is being charged by the wholesale lender and how much is charged by the broker. Wholesale lenders offer lower costs/rates to mortgage brokers than you can obtain directly, so you are not paying “extra” by going through a mortgage broker.

Tax Service Fee – During the life of your loan you will be making property tax payments, either on your own or through your impound account with the lender. Since property tax liens can sometimes take precedence over a first mortgage, it is in your lender’s interest to pay an independent service to monitor property tax payments. This fee usually runs between $70 and $80.

Flood Certification Fee – Your lender must determine whether or not your property is located in a federally designated flood zone. This is a fee usually charged by an independent service to make that determination.

Flood Monitoring – From time to time flood zones are re-mapped. Some lenders charge this fee to maintain monitoring on whether this re-mapping affects your property.

Other Lender Fees

We put these in a separate category because they vary so much from lender to lender and cannot be associated directly with a cost of the loan. These fees generate income for the lenders and are used to offset the fixed costs of loan origination. The Processing Fee above can also be considered to be in this category, but since it is listed higher on the Good Faith Estimate Form we did not also include it here. You will normally find some combination of these fees on your Good Faith Estimate and the total usually varies between $400 and $700.

Document Preparation – Before computers made it fairly easy for lenders to draw their own loan documents, they used to hire specialized document preparation firms for this function. This was the fee charged by those companies. Nowadays, lenders draw their own documents. This fee is charged on almost all loans and is usually in the neighborhood of $200.

Underwriting Fee – Once again, it is difficult to determine the exact cost of underwriting a loan since the underwriter is usually a paid staff member. This fee is usually in the neighborhood of $300 to $350.

Administration Fee – If an Administration Fee is charged, you will probably find there is no Underwriting Fee. This is not always the case.

Appraisal Review Fee – Even though you will probably not see this fee on your Good Faith Estimate, it is charged occasionally. Some lenders routinely review appraisals as a quality control procedure, especially on higher valued properties. The fee can vary from $75 to $150.

Warehousing Fee – This is rarely charged and begins to border on the ridiculous. However, some lenders have a warehouse line of credit and add this as a charge to the borrower.

Items Required to be Paid in Advance

Pre-paid Interest – Mortgage loans are usually due on the first of each month. Since loans can close on any day, a certain amount of interest must be paid at closing to get the interest paid up to the first. For example, if you close on the twentieth, you will pay ten days of pre-paid interest.

Homeowner’s Insurance – This is the insurance you pay to cover possible damages to your home and other items. If you buy a home, you will normally pay the first year’s insurance when you close the transaction. If you are buying a condominium, your Homeowners’ Association Fees normally cover this insurance.

VA Funding Fee – On VA loans, the Veterans Administration charges a fee for guaranteeing your loan. If you have not used your VA eligibility in the past, this is two percent of the loan balance. If you have used your VA eligibility before, it is three percent of the loan. If you are refinancing from a VA loan to a VA loan, it is three-quarters of a percent of the loan amount. Instead of actually paying this as an out-of-pocket expense, most veterans choose to finance it, so it gets added to the loan balance. This is why the loan balance on VA loans can be higher than the actual purchase amount.

Up Front Mortgage Insurance Premium (UFMIP) – This is charged on FHA purchases of single family residences (SFR’s) or Planned Unit Developments (PUDs) and is 2.25% of the loan balance. Like the VA Funding Fee it is normally added to the balance of the loan. Unlike a VA loan, the homebuyer must also pay a monthly mortgage insurance fee, too. This is why many lenders do not recommend FHA loans if the homebuyer can qualify for a conventional loan. However, condominium purchases do not require the UFMIP.

Mortgage Insurance – Though it is rare nowadays, some first-time homebuyer programs still require the first year mortgage insurance premium to be paid in advance. Most mortgage insurance (when required) is simply paid monthly along with your mortgage payment. Mortgage insurance covers the lender and covers a portion of the losses in those cases where borrowers default on their loans.

Reserves Deposited with Lender

If you make a minimum down payment, you may be required to deposit funds into an impound account. Funds in this account are your funds, and the lender uses them to make the payments on your Homeowner’s insurance, property taxes, and mortgage insurance (whichever is applicable). Each month, in addition to your mortgage payment, you provide additional funds which are deposited into your impound account.

The lender’s goal is to always have sufficient funds to pay your bills as they come due. Sometimes impound accounts are not required, but borrowers request one voluntarily. A few lenders even offer to reduce your loan origination fee if you obtain an impound account. However, if you are disciplined about paying your bills and an impound account is not required, you can probably earn a better rate of return by putting the funds into a savings account. Impound accounts are sometimes referred to as escrow accounts.

Homeowners Insurance Impounds – your lender will divide your annual premium by twelve to come up with an estimated monthly amount for you to pay into your impound account. Since a lender is allowed to keep two months of reserves in your account, you will have to deposit two months into the impound account to start it up.

Property Tax Impounds – How much you will have to deposit towards taxes to start up your impound account varies according to when you close your real estate transaction. For example, you may close in November and property taxes are due in December. Your deposit would be higher than for someone closing in May.

Mortgage Insurance Impounds – When required, most lenders allow this to simply be paid monthly. However, you may be required to put two months worth of mortgage insurance as an initial deposit into your impound account.

Non-Recurring Closing Costs not associated with the Lender

Closing/Escrow/Settlement Fee – Methods of closing a real estate transaction vary from state to state, as do the fees. For purchases, a general rule of thumb that usually works in calculating this closing cost is $200 plus $2 for every thousand dollars in price. For refinances there is usually a flat fee around $400 to $500.

Title Insurance – Title Insurance assures the homeowner that they have clear title to the property. The lender also requires it to insure that their new mortgage loan will be in first position. The costs vary depending on whether you are purchasing a home or refinancing a home, so we will not provide a range here.

Notary Fees – Most sets of loan documents have two or three forms that must be notarized. Usually your settlement or escrow agent will arrange for you to sign these forms at their office and charge a notary fee in the neighborhood of $40.

Recording Fees – Certain documents get recorded with your local county recorder. Fees vary regionally, but probably run between $40 and $75.

Pest Inspection – also referred to as a Termite Inspection. This inspection tests not only for pest infestations, but also other items such as wood rot and water damage. The inspection usually runs around $75. If repairs are required, the amount to cover those repairs can vary. The seller will usually pay for the most serious repairs, but this is a negotiable item. Usually (not always) the pest inspection fee is paid by the seller of the home and is not normally reflected on the Good Faith Estimate.

Home Inspection – Since it is the Homebuyer’s choice to obtain a home inspection or not, this cost is not usually reflected on a Good Faith Estimate. However, it is recommended. Keep in mind that the home inspector has a certain set of standards he uses when inspecting a home, and those standards may be higher than required by local building codes. An example is that an inspector may note there is no spark arrestor on a chimney but the local building code may not require it. This sometimes leads to conflicts between buyer and seller.

Home Warranty – This is also an optional item and not normally included on the Good Faith Estimate. A Home Warranty usually covers such items as the major appliances, should they break down within a specific time. Often this is paid by the seller.

Refinancing Associated Costs (but not charged by the new Lender)

Interest – When you close the transaction on your refinance, there will most likely be some outstanding interest due on the old loan. For example, if you close on August twentieth (and you made your last payment), you will have twenty days interest due on the old loan and ten days prepaid interest on the new loan. Your first payment on the new loan would not be until October 1st since you have already paid all of August’s interest when you closed the refinance transaction (since interest is paid in arrears, a September payment would have paid August’s interest, which has already been paid in closing).

Reconveyance Fee – this fee is charged by your existing lender when they “reconvey” their collateral interest in your property back to you through recording of a Reconveyance. This fee can vary from $75 to $125.

Demand Fee – your existing lender may charge a fee for calculating payoff figures. If they do, this fee may run in the neighborhood of $60.

Sub-Escrow fee – though it sounds like an escrow fee, this fee is actually charged by the Title Company (and I’ve never been able to figure out exactly what it is for). Assume it is an income-generating fee similar to some of the lender fees mentioned above. Title representatives who want to explain this fee can send us an email.

Loan Tie-in Fee – though it sounds like a lender fee, this cost is actually charged by the Escrow Company (like the sub-escrow fee, I’ve never been able to understand this fee, either). Escrow officers who want to explain this fee can also send an email.

Homeowner’s Association Transfer Fee – If you are buying a condominium or a home with a Homeowner’s Association, the association often charges a fee to transfer all of their ownership documents to you.

Asking the Seller to Pay Closing Costs – Rules and Advice.

It has become common to ask the seller to pay some or all of the closing costs when you purchase a home. Essentially, this is financing your closing costs since you will probably pay a little bit more for the property than you would if you were paying your own costs.

Keep in mind a few simple rules. On conventional loans you can only ask the seller to pay non-recurring costs, not prepaids or items to be paid in advance. If you are putting ten percent down or more, the most the seller can contribute is six percent of the purchase price. If you are putting less down, the most the seller can contribute is three percent.

On VA loans, you can ask the seller to pay everything. This is called a “VA No-No,” meaning the buyer is making no down payment and paying no closing costs.

On FHA loans, the seller can pay almost any cost, but the buyer has to have a minimum three percent investment in the home/closing costs.

Most refinances include the closing costs and prepaids in the new loan amount, requiring little or no out-of-pocket expenses to close the deal.

If you didn’t get bored as you read through this, now you know everything…a lot, anyway…about closing costs.