Trends in Tracy, Ca Interest Rates and Sales Activity
Friday, November 11, 2011
Closing Costs and Trends in Tracy, Ca
Those who are cash-poor can ask relatives for help. But some lenders advertise another option: If borrowers agree to accept a mortgage interest rate from a quarter to a full percentage point higher than they would ordinarily qualify for, they can receive credit toward their closing costs.
Such mortgages are sometimes called no-closing-cost loans, though the term is misleading. The credit usually covers only fees charged by the mortgage broker or bank, like the loan origination fee, the underwriting expense, and the appraisal, according to Neil Diamond, a mortgage broker in Commack, N.Y. That generally leaves title insurance, mortgage-recording taxes, insurance and escrowed taxes to cover as “recurring” closing costs.
The amount of credit depends on total closing costs and other loan details. A rule of thumb is that for every one-eighth of a point increase in interest rate, borrowers receive a credit worth half a percentage point of the principal amount. On a $400,000 30-year mortgage with a 4.125 percent base rate, the first one-eighth of a point increase would yield a $2,000 credit and so would the second, but the credit for the third would drop to about $400, he said, noting that some lenders set a 5.25 percent ceiling on rates.
The main downside, of course, is that the higher rate and monthly payment remain in place through the life of the loan. Another valid way to get closing costs paid for you is to ask the seller to pay these costs. Sometimes, even on short sales and bank owned sales, closing costs can be negotiated where the buyer pays no closing costs.
Be sure to ask your Realtor whether or not he or she feels there is a good chance you will get the seller to pay these costs. If not, having the closing costs financed into your mortgage may be the only alternative to actually paying them out of your pocket.
Even so, a “no-closing-cost” loan can be useful for anyone who has found a home and does not want to wait to save thousands of dollars more to cover all the closing costs. It also can be worthwhile for “people who would rather hold onto their money, using their hard earned cash for other things or keeping it in the bank for emergencies.
Nationwide, total closing costs on a $200,000 mortgage average $4,070, according to a recent survey from Bankrate.com. That represents an 8.8 percent increase over last year, and reflects higher lender fees. New York’s closing costs averaged $6,183, the highest in the nation. In New Jersey the average was $4,589; and in Connecticut, $3,843, according to Bankrate.com.
Generally, the higher your credit score the better loan options you may have available, so be sure to check into your credit and get a pre-approval letter before you go out shopping for a new home. For more information about buying your new home contact Joe Montoya at 209-740-1447 or by email at joemontoya@gotracy.com
