Most home buyers understand the basics of home mortgage loans. They know what a mortgage loan is, how interest works, and other fundamentals of the home loan process.

But when it comes to the closing costs associated with buying a home, many of these same home buyers get caught off guard – by both the variety and total amount of closing costs. By understanding and preparing for these costs ahead of time, you can avoid such surprises.

What Are Closing Costs?
Closing costs are the total cost of completing the transfer of ownership of a house. These costs do not include the purchase price of the home. Rather, they are the extras — fees and expenses aside from the purchase price.

On average, closing costs range between 3% and 5% of the total loan amount. So for a loan of $200,000, closing costs might run $6,000 to $10,000 (3% and 5% respectively of $200,000).

What’s Included Within Closing Costs?
Closing costs vary depending on where you live and what mortgage lender you choose. But closing costs often include fees for the following (this list is not all-inclusive):

* Loan origination
* Loan application
* Appraisal
* Document preparation
* Attorney’s services
* Escrow agent’s services
* Pest inspection
* Credit report / processing

Getting an Estimate of Closing Costs
The Real Estate Settlement Procedures Act, or RESPA, requires that mortgage lenders give you a good faith estimate of all the loan-related fees you’re likely to pay at closing. They must give you this estimate at the time of loan application. Keep in mind, however, that these are just estimates. Actual closing costs may be more than the good faith estimate closing costs.

Shop Around
It’s a good idea to obtain good faith estimates from multiple lenders. Don’t choose a lender based on their interest rates alone. Shop around for estimated closing costs as well.

Just realize that large discrepancies between estimated and actual closing costs are not uncommon. You can prepare yourself for this by having enough money in the bank to cover the good faith estimate amount and then some.

A few days before closing, you will receive another document called a settlement statement, or “HUD-1 statement.” This document will give you a more exact tally of the closing costs you’ll be expected to pay at closing.

Conclusion
Closing costs include a wide variety of fees and charges. They can add up to a sizable amount, so it’s important to prepare for them in advance. Be sure to factor closing costs into the equation when looking for a mortgage lender. Proper planning can help you avoid unpleasant surprises on closing day.

Professional Advice From HomeBuyingInstitute.com

Credit remediation is a subject consumers often face with fear and trepidation, and for good reason. With the exception of recognizing that the best score wins, the average home shopper knows very little about the whole credit scoring process. Sub-prime borrowers who are eager to move into A-Paper territory often find themselves at a loss when trying to find ways to upgrade their credit history. The good news is there are ways to improve less-than-perfect credit scores and obtain a loan for the home you really want.

The first step in the process is making sure that you have a current copy of your credit report. Congress recently amended the Fair Credit Reporting Act so that consumers may now receive one free credit report annually. There are three major credit bureaus: Equifax, Experian, and Transunion. Since entries can vary across bureaus, you’ll want to request a free report from each of the three companies. (Go to www.annualcreditreport.com)

It’s also important to know just what a good credit score is. Most A-Paper scores generally begin around 680, although this number may differ slightly among lenders. Don’t despair if you come up shy, there is always room for improvement. Increasing your score just 5 points can save a significant amount of money. For example, if your score is 698 and you increase it to 703, then you could save yourself thousands of dollars over time as a result of a slight improvement to your loan’s interest rate.

While credit repair is necessary for some, it’s not the only way to increase your credit score. Even if you have stellar credit, you can enhance your score through these steps:

• Evenly distribute your credit card debt to change the ratio of debt to available credit. Let’s say you have a credit score of 665. If you have debt on only one card, and four additional credit cards with zero balances, evenly distributing the debt of the first card could move you closer, and possibly into, that ideal bracket.

• Keep your existing accounts open and active. The average consumer is usually anxious to close credit card accounts that have zero balances, but doing this can cause them to lose the benefits of a long-term credit history and increase their ratio of debt-to-available credit. The bottom line is don’t close those old accounts!

• Keep credit inquiries to a minimum. Each inquiry into your credit history can impact your score anywhere from 2-50 points. When it comes to mortgage and auto loans, even though you’re only looking for one loan, multiple lenders may request your credit report. To compensate for this, the score counts multiple auto or mortgage inquiries in any 14-day period as just one inquiry, so try and stay within that time frame.

Remember, credit scores don’t change overnight. Improving them requires time and diligent effort on your part, so it’s a good idea to get the ball rolling at least three to six months prior to submitting your application for home financing.

If credit repair is what you need, you can either begin the process yourself or seek out a repair service. If you decide to make your own improvements, visit as many websites as possible to get information regarding credit laws and consumer rights. Diligently search through them and educate yourself to ensure that you don’t sustain any self-inflicted wounds. A good place to start would be the Federal Trade Commission’s website, which contains a wealth of helpful literature.

If you’re facing severe or complicated credit issues, then you’ll probably want to enlist the assistance of a professional credit repair company. Before you do, be sure to familiarize yourself with the FTC’s regulations on credit repair. With over 1100 credit repair companies to choose from, it’s important to be certain you are dealing with a reputable firm. Examine the FTC’s information on fraudulent practices to avoid falling prey to credit repair scams.

Addressing credit issues can be uncomfortable to say the least. But by taking these steps now, you’ll be that much closer to obtaining the home of your dreams.

Additional Resources:

To order your free credit report, go to:
www.annualcreditreport.com

To read the Fair Credit Reporting Act, go to:
www.ftc.gov/os/statutes/frca.htm

For the Federal Trade Commission’s information on consumer credit, go to:
www.ftc.gov/bcp/conline/edcams/credit/index.html

David Lereah penned a nice article that notices Denver’s affordable home prices as compared to Northern California markets. Essentially, Denver was bypassed on the recent boom (2001-2005) and due to a strengthening local economy, cities like Denver and Salt Lake are seeing a pick up in sales activity. Net is Denver is on the radar for affordability, job growth and the obvious high quality of life. Read more by clicking here