How much should you expect to pay in closing costs to buy a home

So you want to buy a house but you’re not sure how much money you need for closing costs on top of the down payment.  Well, here is an overview of what you can expect to pay in North New Jersey on a home purchase of $500,000.

Information was provided by:

Paul Davis from Annie-Mac Home Mortgages                                 
pdavis@annie-mac.com                                                     
856-334-3181

When you receive a loan estimate (LE) from a lender, there are approximately six categories of charges, collectively known as closing costs or sometimes called settlement charges.

The categories are as follows:

Origination charges – these are the costs for originating the loan and any loan discount points you would elect to pay to discount the interest rate. The origination charges vary from bank to bank. Banks are subject to an incredible amount of compliance requirements and the additional staffing required to meet the compliance regulations has greatly increased the cost for banks to originate a loan. You can expect to pay anywhere from $500 up to $2,500 for origination charges. The origination charge is often called the bank fee.

Services you cannot shop for – the charges in this category include the credit report, the flood certification, tax service, lender’s title insurance and appraisal fees. The credit report is anywhere from $15 to $30 per applicant. The flood certification, which is provided by FEMA, is $25. The tax service is typically $75. The lender’s title insurance policy has to be enough to cover the amount of the mortgage. In this scenario, figure $1700 for the necessary coverage. The cost of the appraisal is determined by the type of loan and the type of home that is being purchased. An FHA appraisal tends to be $50 to $75 higher than an appraisal on a conventional loan. Expect to pay between $375 and $475 for an appraisal on a single family home. Appraisals performed on multi-family homes and homes to be used as investment properties are more expensive because more work is required by the appraiser.

Services you can shop for – the charges in this category are for items such as the title services, any elective inspections or treatments, and attorney fees. You can expect title services to cost an additional $1200-1400. The home inspection could cost anywhere from $600 up to $1,000 and typically includes a termite inspection. Often times a client will choose to have the grounds of the subject property checked for underground tanks. The cost of these sweeps are typically below $400. A land survey, while not required by the lender and typically not required by the title company, is money well spent to firmly establish the legal boundaries of your subject property. These land surveys can run from $450 up to $1,000.  Attorney fees vary but you can expect to pay around $1200 to $1500.

Taxes and other government fees – each County has a charge to record the deed and the mortgage at the County Courthouse. Expect to pay between $400 and $500.

Prepaids – prepaids are for items such as home insurance premiums (the lenders require 12 months to be paid up front), any mortgage insurance premium if required, and prepaid interest which is collected at settlement to cover the interest that accrues from settlement day until the last day of the month. Also, any property taxes that are due within 60 days of settlement are typically collected.

Initial escrow payment at closing – if you elect to have the lender collect for the property taxes and the homeowners insurance (and flood insurance when required), this is known as ‘escrowing’. The lender will project how many months of taxes and insurance are required to be collected at settlement so that, with your monthly contributions, the escrow account will have sufficient funds to pay the taxes and insurance premiums as they come due.

In total, these costs amount to roughly 2-5% of the purchase price of the home and are in addition to the cash down payment you will need for the loan.

For more information to go: http://www.urbansuburb.com.

The Split-Level Home Makes a Come Back

Photo by The Cleary Company. See more traditional exterior designs

Photo Credit: Houzz

A split-level home is a style of house in which the floor levels are staggered. There are typically two short sets of stairs, one going up to a bedroom level, and one going down to a basement level. The basement level is usually at grade level or slightly below and finished, and often contains additional living area.  Sometimes there is an additional basement level, below grade, which is frequently unfinished. Split-level houses originated in the 1950s as an alternative to the one level ranch home.  The design proliferated in the 1960s particularly in the suburbs where sloped terrains and smaller lots could not necessarily accommodate a more sprawling ranch design.  No other architectural style elicits such reaction as the split-level home but long after the Brady Bunch era, this style is having a resurgence in popularity.

There are several reasons for the split-level’s increase in popularity:

• Compared to more prolific architectural styles, like the colonial, dollar per square foot, the split-level gives you much more bang for the buck
• The proportion of living space to bedroom space is usually greater in a split-level design versus other architectural styles which are more vertical like victorian styles
• They usually have a more open floor plan with the kitchen, dining and living rooms in close proximity and often having no or partial walls
• The garage is typically attached providing easy access to the home and not taking up valuable yard space for a detached garage
• The “split”of the more formal entertaining spaces and more casual family spaces lends itself well to family living.  There is space for everyone!

 

For more information to go: http://www.urbansuburb.com.

If Your New Year’s Resolution is to Buy a House This Year

 

Here are 3 things you should do immediately if you plan to buy in 2017:

1. Clean up your credit.  Your credit score is one of the most important determinants of not only getting a mortgage but also what mortgage rate you qualify for.  But errors on your credit report can bring down your credit score and take time to fix.  Don’t wait until you find that home you want to buy to find out there are any issues.
2. Talk to a mortgage broker and get pre-approved.  While an online mortgage calculator will give you some idea of monthly payments, you will need a pre-approval to buy that house you love.  If you plan to buy in the next 6 months go ahead and get the pre-approval so you are ready.  Most pre-approvals are good for 6 months.  A mortgage broker will also explain what you need in terms of cash for the down payment and closing costs so that you can plan and save.  Many people believe you need 20% cash down payment but there are many loan programs out there that don’t require that much down.  So talk to a mortgage broker.
3. Educate yourself on the market.  I am happy to work with people early on in the buying process.  I give tours of different towns and provide information and resources so that my clients can find the right place to call home.  But deciding on the right town is just one thing, there is also understanding what houses go for in that town and what factors impact price and by how much.  I not only show people houses but then show them what they actually sell for, since in some of the markets where I work many houses go well over ask.  There is at least a 2-3 month lag between houses coming on the market and selling, so it is best to plan ahead.  This will most likely be the biggest investment in your life, so just like any other investment make sure you have the knowledge to empower your decision making.

For more information go to http://www.urbansuburb.com or call me at 201-463-3754.

 

How a mortgage preapproval helps you in the home buying process

Buyers are often eager to get their home search started but here is why you need a mortgage preapproval before you start your home search.

• Most importantly you need to know how much home you can afford.  If you are searching for homes in the $600,000s and then find out you only qualify to buy a home up to $450,000 based on what you have for a down payment and can borrow, you might be disappointed in what that reduction in buying power means in terms of house size, features and location.
• Not all home loans are the same and depending on the loan type that best suites your financial picture and personal situation, there are different requirements and loan amounts you could qualify for.  It is best to speak to a mortgage professional to decide what is the best loan product for you and what those mean in terms of down payment requirements and monthly expenses.
• Getting a preapproval before you shop for a house gives you time to fix unexpected errors on your credit reports.  Those errors do happen, such as a bill that was paid that still shows up as a  delinquency, a credit card you didn’t open that is on your report or in my case, a credit card company reported my death to the credit reporting agencies.  That one was interesting to clear up!  Needless to say it took time.
• In a competitive market which we are currently in, at least in the Montclair area, you won’t be taken seriously making an offer on a house unless you have a preapproval included in the offer package.
• Because of the competitive market, the timelines are accelerated.  It is not uncommon for a house to come on the market or showings to begin Thursday or Friday and offers being due the following Tuesday afternoon.  If you have not already started the process to get preapproved, that can be very rushed to get all the paperwork in and also contemplate a strong offer.  This can create additional stress on an already stressful multiple bidding situation.
• Lastly, having the preapproval means that when you do find that dream home, the process can be accelerated because the lender has the majority of the paperwork needed to ultimately provide the mortgage commitment.  Some lenders even offer different levels of preapproval further simplifying the process of the loan application after the offer to purchase is accepted.

For more information or if you would like a referral to a mortgage broker, please contact me at http://www.urbansuburb.com.

What To Do With An Underground Oil Tank In A Real Estate Transaction

According to the New Jersey Fuel Merchants Association there are over 100,000 buried oil tanks in New Jersey.  In my real estate dealings, addressing an underground oil tank is common practice.  The risk in buying a house with an underground oil tank is that it may have leaked.  It is not that uncommon for older underground oil tanks to leak oil into the surrounding soil or in extreme cases the ground water.  The party responsible for cleaning up a spill is the current home owner and most home owner’s insurance companies do not cover the clean-up.  Even oil tank warranty companies such as Proguard have restrictions and coverage limits.  That is why in representing buyers, I recommend that properties be checked for underground oil tanks and that the real estate contract stipulate that it is the seller’s responsibility to remove the underground oil tank.  And as a seller, if you have an oil tank, it is best to pro-actively remove it before even listing your house so that it won’t become an issue in the real estate transaction.

The following is some frequently asked questions and answers that were provided by NorRoc Enterprises, one of the environmental companies I recommend to remove underground oil tanks.  The picture above is actually the company removing a 1000 gallon oil tank from my property.  They can be reached at 973-541-9559 or norroc@optonline.net.

What is involved with removing an underground oil tank?

The first step is a site visit.  During this site visit, the representative will find the location and orientation of the oil tank and see if there is any fuel or water in the tank.  The field rep will also check for equipment access.  The next step is the permit process.  NorRoc applies for all permits from the local municipality which has up to 21 days to process the permits.  Once the permits are received, the process to remove the tank is only one day.  In a few short hours, the tank will be exposed, cut open and cleaned and then removed from the ground.  Once removed, the field crew waits for the arrival of the municipal inspector to approve the tank removal and excavation.  Once cleared, the area is backfilled with certified clean / virgin quarry soil.

How much does it cost to remove an underground oil tank?

The cost associated with an oil tank removal can vary depending on size, accessibility and remaining oil in the tank.  An average 550 gallon tank that is easily accessible and has no fuel remaining can cost approximately $1600 to remove without permits.  For a 1000 gallon tank the cost would be approximately $1800.  Towns can charge from $50-$279 for the permits and the cost is passed onto the customer.  There is no charge from NorRoc for getting the permits.

What happens if the oil tank leaked?

If the tank shows signs of leakage, the NJDEP (New Jersey Department of Environmental Protection) is contacted and a case number is issued.  Once the case number is issued, the NJDEP will require remediation be completed by a NJDEP certified contractor.  This contractor manages the process and the approvals required by NJDEP.   Remediation requires removal of all contaminated soil.  Soil samples are taken from the excavation and incorporated into a report that is issued to the NJDEP for approval.

How much can the clean-up cost?

Clean-up can range from $10,000 to $200,000 depending on the amount of soil that needs to be removed, if there is groundwater contamination and what further measures need to be taken per NJDEP protocol.

How long does the clean-up take?

Depending on the extent of the contamination, the clean-up can take a few days up to a few months.  If it is simply soil contamination, the field time can take 1-5 days with additional time for report writing, receipt of soil sample lab reports, disposal certificates etc.  In the event ground water is contaminated, that would be a case by case basis as monitoring wells would have to be installed and possibly a water treatment system.  This is an extensive process and it could take months to complete.

For more information go to www.urbansuburb.com