First-time home buyer: Closing costs questions

[shiznit2169]

Hello,

I was wondering if someone could shed some light on closing costs. Lay it out in basic terms.

Here's a scenario:

Option A: Pay the full purchase price of the home (listed at 116,900) and seller agrees to pay closing costs

Option B: Pay 110K for the home, but buyer pays closing costs.

Closing cost is estimated to be around 5-6K.

Seller needs to walk away with no less than 110K. However, it is my understanding that the seller can only pay up to 3% of the loan purchase price so even if the buyer pays the full price (116,900) they would still have to pay 3K in closing costs since seller can only pay 3% of the price.

The buyer could pay 110K and all of closing costs but with 5% down, that's roughly 10-12K out of pocket expenses. The buyer would like to minimize out of pocket expenses and use the extra cash to install central air, remodel the kitchen, replace windows, etc.

Hopefully there are some real estate experts on this board. Any advice would be greatly appreciated.

Forgot to add.. is conventional or FHA loan better? Trying to determine which loan and bank is best for a 30-year fixed rate.

 

[LAM]

rolling over the closing costs into the loan just means more payments to the banks in interest, best to minimize this if possible. better to save up for home improvements in the future.

30 year mortgages are for suckers unless you basically DON'T want to not make any money on the property in the long run anymore in the US. the "value" of the average home in the US appreciates at far less than the real inflation rate which is closer to 4.5% a year. unless your buying in a place say near the water, etc. where the value increases above the real inflation rate you really aren't making any money once you adjust everything for inflation, it's more of a hedge these days.

download this loan amortization excel sheet and check out the savings when you change from a 15, 20, 30 year loan. you save a lot in interest, odds are the mortgage interest deduction in the US will go away in the near future.

Amortization Schedule for Excel - CNET Download.com


just based on:

100k @ 3.6% x 30 years

163k total payments and 63k in interest at $454 a month

x 15 years and that drops to 130K total payments and 30K in interest a savings of $30k and you actually own your home in 15 years at $719 month

 

[The Prototype]

I would do option A if you are a first time home buyer. It leaves you with more cash. Amortizing $5-6k over 30 years is nominal at say 4%. Or you can reinvest that cash and earn more than 4% but i think it's better to have cash on hand in case or if you decide you don't need it later you can just pay down the loan with it. 3% of closing cost is pretty standard where i live. All of the closing cost is a great deal. I am a real estate appraiser and majored in finance with a minor in real estate so if you have any questions I'll help you if I know the answer.

 

[Big Pimpin]

I agree with option A as well. As a first time home buyer, money is and will remain tight for awhile but that's half the fun so keep as much as possible in your pocket.

Also, if you can swing the 15 year note, definitely do it because you'll have a fair amount of equity even in 3-5 years time.

 

[The Prototype]

I agree with option A as well. As a first time home buyer, money is and will remain tight for awhile but that's half the fun so keep as much as possible in your pocket.

Also, if you can swing the 15 year note, definitely do it because you'll have a fair amount of equity even in 3-5 years time.

Definitely. If you can afford a 15-year, that's always the way to go. Plus your loan will be 25 to 50 basis points lower so if you got a 3.75% on a 30-year, you might get 3.5% or lower for a 15-year.

 

[Swiper]

11 Great Reasons to Carry a Big, Long Mortgage

http://www.ricedelman.com/cs/education/article?articleId=232






Don't Be Seduced by 15-Year Mortgage Rates


http://www.ricedelman.com/cs/educat...am=Don't Be Seduced by 15-Year Mortgage Rates

 

[OTG85]

I pay 800 month rent guess I'm a sucker

 

[OfficerFarva]

$120,000 for a house lol An average old thing out here is at least $500,000.

 

[LAM]

11 Great Reasons to Carry a Big, Long Mortgage

Article | Ric Edelman

in 30 years what percentage of the US population will be able to afford that home with incomes currently stagnant for the LAST 30 years?

you think incomes are going to increase for the majority over the next 3 decades? enjoy paying all the interest to the banks for a home you won't be able to sell to help fund "retirement"...

most country's don't even have a 30 year mortgage as an option, it's mainly a US loan product...and that alone should tell you something.

 

[LAM]

11 Great Reasons to Carry a Big, Long Mortgage

Article | Ric Edelman






Don't Be Seduced by 15-Year Mortgage Rates


Don't Be Seduced by 15-Year Mortgage Rates

you should check your sources more thoroughly....

Jump$tart.org | Edelman Financial Services, LLC


Company Name(s):
Edelman Financial Group
Affected Securities:
NASDAQ: EF

April 16, 2012 (Shareholders Foundation) -- An investigation for investors in NASDAQ:EF shares concerning whether the offer to acquire Edelman Financial Group Inc at $8.85 per share and the buyout process are unfair to investors in Edelman Financial Group Inc (NASDAQ:EF) was announced.

The investigations by law firms concern whether certain officers and directors of Edelman Financial Group Inc breached their fiduciary duties owed to NASDAQ:EF investors in connection with the proposed acquisition.

On Monday, April 16, 2012, The Edelman Financial Group Inc. (NASDAQ: EF), announced that it has entered into a merger agreement with affiliates of Lee Equity Partners, LLC, to be acquired for $8.85 per share in cash.

The Edelman Financial Group said the offer represents a premium of 43% over the Edelman Financial Group?s closing price Friday of $6.18, and a premium of 33% over its volume-weighted average closing price over the last 20 trading days.

Following the going private offer, shares of Edelman Financial Group Inc (NASDAQ:EF) jumped from $6.18 on Friday, April 13, 2012 to $8.76 per share on Monday.

However, Members of the Edelman Financial Group?s senior management, who currently own approximately 26% of TEFG?s outstanding shares, have already agreed to vote their shares in favor of the merger.

Furthermore, Edelman Financial Group?s financial performance increased over the past recent years. Edelman Financial Group Inc reported that its annual Revenue rose from $111.26million in 2009 to $169million in 2011 and its Net loss of $5.48million in 2009 turned into a Net Income of $5.496million in 2011.

Therefore the investigation for NASDAQ:EF investors concerns whether the proposed transaction is unfair to Edelman Financial Group stockholders.

Specifically, the investigation focuses on whether the Edelman Financial Group Board of Directors undertook an adequate sales process, adequately shopped the company before entering into the transaction, maximized shareholder value by negotiating the best price, and acted in the shareholders' best interests in connection with the proposed sale.

 

[LAM]

I pay 800 month rent guess I'm a sucker

renting is going to be the new future in the US. single family homes are for families and that demographic group in the US is going to continually shrink for the foreseeable future.

this is just one of many factors that needs to be taken into consideration when looking at the future of housing in the U.S. wages, birth rates, marriage/divorce rates, etc.

NVSS - National Marriage and Divorce Rate Trends

the money is in multi-unit rentals in terms of an actual investment

 

[Swiper]

you should check your sources more thoroughly....

Jump$tart.org | Edelman Financial Services, LLC


Company Name(s):
Edelman Financial Group
Affected Securities:
NASDAQ: EF

April 16, 2012 (Shareholders Foundation) -- An investigation for investors in NASDAQ:EF shares concerning whether the offer to acquire Edelman Financial Group Inc at $8.85 per share and the buyout process are unfair to investors in Edelman Financial Group Inc (NASDAQ:EF) was announced.

The investigations by law firms concern whether certain officers and directors of Edelman Financial Group Inc breached their fiduciary duties owed to NASDAQ:EF investors in connection with the proposed acquisition.

On Monday, April 16, 2012, The Edelman Financial Group Inc. (NASDAQ: EF), announced that it has entered into a merger agreement with affiliates of Lee Equity Partners, LLC, to be acquired for $8.85 per share in cash.

The Edelman Financial Group said the offer represents a premium of 43% over the Edelman Financial Group?s closing price Friday of $6.18, and a premium of 33% over its volume-weighted average closing price over the last 20 trading days.

Following the going private offer, shares of Edelman Financial Group Inc (NASDAQ:EF) jumped from $6.18 on Friday, April 13, 2012 to $8.76 per share on Monday.

However, Members of the Edelman Financial Group?s senior management, who currently own approximately 26% of TEFG?s outstanding shares, have already agreed to vote their shares in favor of the merger.

Furthermore, Edelman Financial Group?s financial performance increased over the past recent years. Edelman Financial Group Inc reported that its annual Revenue rose from $111.26million in 2009 to $169million in 2011 and its Net loss of $5.48million in 2009 turned into a Net Income of $5.496million in 2011.

Therefore the investigation for NASDAQ:EF investors concerns whether the proposed transaction is unfair to Edelman Financial Group stockholders.

Specifically, the investigation focuses on whether the Edelman Financial Group Board of Directors undertook an adequate sales process, adequately shopped the company before entering into the transaction, maximized shareholder value by negotiating the best price, and acted in the shareholders' best interests in connection with the proposed sale.

um yeah ok. what does that have to do with 30 year mortgages?






"Edelman Financial Services LLC, one of the largest and best-known financial planning and investment advisory firms in the country, is dedicated to helping ordinary consumers discover the path to financial security.

For more than two decades the planners at Edelman Financial have been providing comprehensive, specially tailored personal finance advice, including college, retirement and estate planning as well as insurance and mortgage guidance, to individuals and businesses. Along the way the firm has received more than 70 financial, business community and philanthropic awards, including ranking among Barron's "Top 100 Independent Advisors."

Ric Edelman, founder, chairman and CEO, is a New York Times best-selling author of seven books, including the personal finance classic The Truth About Money, and host of his own Public Television series and syndicated weekly radio show. He also publishes a monthly newsletter, has built one of the most comprehensive free educational resources online about personal finance at RicEdelman.com, and offers a variety of video and audio programs that help people achieve their financial goals.

---

Ric Edelman is Chairman and CEO of Edelman Financial Services, a Registered Investment Adviser, and Co-CEO, President and a Director of The Edelman Financial Group (NASDAQ: EF). He is an Investment Adviser Representative who offers advisory services through EFS and a Registered Principal of (and offering securities through) Sanders Morris Harris Inc., an affiliated broker/dealer, member FINRA/SIPC.

Barron's rankings "Top 100 Financial Advisers," (2004-2010) and "Top 100 Independent Financial Advisers," (2007-2010) based on the quality of the advisors’ practices, including client retention and compliance record, contribution to the firm’s profitability, and the volume of assets overseen by the advisors and their teams."
http://jumpstart.org/edelman-financial-services-llc.html

 

[The Prototype]

Any time it is financially feasible to do a 15-year mortgage versus a 30-year, it's always the best option. Not only is your interest rate lower but total interest paid is favorable to homeowner. It's the same principle of making an extra car payment every year. I'm of the opinion that the banks take enough of our money.

 

[The Prototype]

That analysis by Edelman is flawed. First, you don't stop paying interest after 15 years on a 30-year mortgage but you do after a 15-year mortgage. So comparing the interest paid is completely wrong. Also, if you really want to crunch numbers, you would need to amortize the loan using a lower interest rate on a 15-year versus a 30-year by at least 25 basis points. You do get a tax deduction but who knows whether that will still be there in 5, 10 or 30 years. That's a big uncertainty right now. I could make the argument that after I pay off a mortgage on a 15-year loan, I could take the mortgage payments that I would have paid and reinvest at 7-8% while a person with a 30-year mortgage has his money tied up for 15 years paying a 4% or so interest rate. Frankly, numbers don't lie. Lower interest rate, less total interest paid, financial freedom from a large debt and pride of ownership are the biggest reasons why you go with a 15-year loan.

 

[jay_steel]

There are pros and cons with a 15 to 30 year loan. It also determines where you live and what debt do you have. I took out a 30 year loan because our market is rising in our city. I knew this, my house has all ready gone up 10% this past year. We got locked in at 2.9% as well. I have no desire to live in this house for more then 5-6 years and plan to sale it right after that time period. The amount of profit made during that time period would be VERY marginal where saving the extra 400$ a month to put to credit card debt that has a 20% interest rate and student loans would be much more wiser. With this I was able to pay off 80% of my debt with in a year with a proper plan and then take that extra 400 and put it into my 401k which is matched my my company. The problem is most people that do the 30 year loan to save money just blow it on consumable items and do not find another way to decress their debt and incress profit.

Only reason why i only plan on living in my house for that time even though its a brand new house and big, is becasue I don't like the city and want more property 20 acres or more. Could build by my farm but its a fucking dust bowl out there. I do own lake side property but getting power out their would be outragous and to pave the road. lastly i fucking hate CA and want to move...

So basically my .2c is if its a short term home do what you can afford. if its a 15 year or 30 year you dont want to put your self in a position that you can not properly pay off debt fast and invest.

For that home find another home then, allot of people are willing to pay full closing cost or at lest 3.5% which will basically cover closing costs. I spent 150$ out of my pocket for my home and ended up getting it back. zero down, 2.9% no API. 243k paying 1230 a month with insurance and ect.

 

[AkaMr.AK]

There are pros and cons with a 15 to 30 year loan. It also determines where you live and what debt do you have. I took out a 30 year loan because our market is rising in our city. I knew this, my house has all ready gone up 10% this past year. We got locked in at 2.9% as well. I have no desire to live in this house for more then 5-6 years and plan to sale it right after that time period. The amount of profit made during that time period would be VERY marginal where saving the extra 400$ a month to put to credit card debt that has a 20% interest rate and student loans would be much more wiser. With this I was able to pay off 80% of my debt with in a year with a proper plan and then take that extra 400 and put it into my 401k which is matched my my company. The problem is most people that do the 30 year loan to save money just blow it on consumable items and do not find another way to decress their debt and incress profit.

Only reason why i only plan on living in my house for that time even though its a brand new house and big, is becasue I don't like the city and want more property 20 acres or more. Could build by my farm but its a fucking dust bowl out there. I do own lake side property but getting power out their would be outragous and to pave the road. lastly i fucking hate CA and want to move...

So basically my .2c is if its a short term home do what you can afford. if its a 15 year or 30 year you dont want to put your self in a position that you can not properly pay off debt fast and invest.

For that home find another home then, allot of people are willing to pay full closing cost or at lest 3.5% which will basically cover closing costs. I spent 150$ out of my pocket for my home and ended up getting it back. zero down, 2.9% no API. 243k paying 1230 a month with insurance and ect.

Did you get a USDA loan? There are tons of homes in my area that qualify for a USDA loan.

 

[jay_steel]

VA loan... was dealing with all the same shit on closing costs until i got pissed off and told them to get bent. I was looking for a year and was sick of idiot banks and people. To many short sales... Drove to lennar and told them I am frustrated I want this house for x amount of dollars with every upgrade they offer. She said she doubts she can do that but will call me back and called me back and said they can do it as long as they dont have to give me a refrigerator lol. I laughed and said I all ready have a new fridge. I love my new home by the way. My old home was a piece of shit we were renting only 20 years old and my energy bill was 500 a month...

My new home has not cracked about 80$ in the fresno 105 degree head with the ac at 76.

 

[jagbender]

$120,000 for a house lol An average old thing out here is at least $500,000.

I just bought a forclosure here in Florida that was built in 2006. 2160 SQ feet under Air 2750 sq feet total. 4 bedroom with study and formal dining room.
$115K added about 25K. All decked out granite counter tops, 42" maple cabinets. 20" porcelain tile, LED lighting, new ceiling fans and lights.
I am a licensed builder, and did most of the work myself.

Right now is a great time to buy if you can.

 

[jay_steel]

all the forclosures where i live are shit piles. Some are good, but need work like you did and I just dont have the time and means to put money in. Thats why I just bought new, and was done with it. Only updade I am doing now is a back patio, with a spa and koi pond. I am going to do the pond my self.

 

[Gissurjon]

11 Great Reasons to Carry a Big, Long Mortgage

Article | Ric Edelman





Don't Be Seduced by 15-Year Mortgage Rates


Article | Ric Edelman

For this analysis to make sense there are a couple of things that NEED to be certain
A. That tax deductions will remain (has anybody noticed that the plan is to start taxing the shit out of us??)
B. General wages need to grow at the same rate or faster than inflation (hasn't happened in decades)
C. "Investments" need to be giving you a certain minimum return (we need to discuss that part at all?)

Did Mitt Romney write this??

 

[LAM]

Did Mitt Romney write this??

a guy that makes his living servicing other peoples investments. the typical person that works in finance, they can't make money on their own as they have no real skills. have to use other peoples to get rich.