Archive for May, 2008
Closing Cost Considerations
No one really likes surprises. Particularly when they come up shortly before a scheduled closing.
As a buyer, your mortgage banker will provide you with a Good Faith Estimate after you’ve submitted your mortgage application. The GFE will help you understand approximately how much money you’ll need to bring to the closing.
The mortgage brokers my clients tend to use have typically been very accurate with their GFEs, which is a happy occassion for my clients. However, there are some things that the GFEs don’t always estimate well, one of which is utility adjustments, which are typically done a day or so before the closing.
Unless you’ve been living under a rock, you probably know that oil and gas prices have been moving upward at a pretty good clip. The current average price for home heating oil is $4.189. *barf*
If you’re buying a house that is heated by oil, you might want to clarify with the sellers and their agent that the oil tank should be read at the current fill level. You don’t necessarily want the oil tank topped off as a “closing courtesy” because your closing costs could increase significantly.
For example, if the house has a 330 gallon tank and it’s only 1/4 full, your closing costs will increase by over $1,000. Yikes!
Time to start investigating solar and wind…
Mortgage Math Tip
Buyers often come to me and say that they want to keep their monthly mortgage payment below a certain amount. It’s typically some amount over what they are currently paying in rent. For every house they will ask me, “What’s my estimated monthly payment?” I like to teach people this simple trick so when looking online, they can determine if they should be considering a property.
Here’s the trick…
At an interest rate of 6% (which is right about where mortgage rates are right now), every $100,000 in mortgaged money equates to approximately $600 a month for the principle and interest portion of a mortgage. Correspondingly, every $10,000 in mortgaged money equates to approximately an additional $60 a month.
Remember, your monthly mortgage payment is comprised of 4 things; principle, interest, taxes, and insurance.
So, if you were to mortgage $210,000 for a home, the principle and interest portion of the monthly payment would be approximately $1,260. You then need to take the estimated yearly tax amount, divide it by 12, and add it to the $1,260. Additionally, you need to take the estimated yearly insurance amount, divide it by 12, and add it to the $1,260. And there you have your approximate monthly mortgage cost.
One difficulty buyers have a hard time accepting is that taxes can sometimes account for 25-30% of the monthly payment allowance and they’re not really taking that into account. They think they can “get more house” because they’ve used an online mortgage calculator that ignores taxes and insurance. It’s frustrating to them (and to me), as I have to explain that if they want a monthly payment of $X, they either have to look in a lower price range, or readjust their monthly payment allowance.
Another catch is Private Mortgage Insurance, or PMI. If you’re not putting 20% down with the purchase, you will more than likely have to pay a monthly PMI fee. As a buyer, you should speak with your lender about PMI because the monthly amount will vary based on the buyer’s profile and the price of the house. This will be added to your monthly payment allowance though, and it is commonly overlooked.
10 Thomson Road, West Hartford
If you’re looking for a charming home within walking distance to West Hartford Center and Blue Back Square, this might be the one!
It’s a 1759 square foot, 3 bedroom, 2.5 bath colonial with nicely refinished hardwood floors and central air. There is a first floor family room, a 1-car oversized garage, and potential to finish the basement. The listing price is $297,500.
If you would like to see the home, you can call me for a showing (860-655-2125), arrange a showing through your agent, or stop by the open house on Sunday, May 18 from 1:00-4:00PM.
