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What Closing Costs Can I Expect?

by Allyson Hoffman

Finally, after so much searching you've found the home you've been dreaming of in Chicago's North Shore.  You know you will be expected to pay closing costs, but what exactly are these costs and what will you be expected to pay?

Typically, closing costs run between 3% and 5% of your loan amount, so if you're borrowing $100,000 you can expect closing costs of $3,000 to $5,000. If you're borrowing $200,000 you can expect closing costs of $6,000 to $10,000.

The smart thing to do is to obtain good faith estimates from two or three lenders and compare the costs. Then be prepared to ask the lender you choose to meet the best offer. Here are some of the items you can expect to find on a Good Faith Estimate:

~ Loan origination fee (1% of the amount borrowed, or $100 for every $10,000 borrowed)
~ Loan discount fee
~ Loan application fee ($75 to $400)
~ Points (to "buy down" the interest rate: between $100 and $300 for every $10,000 borrowed)
~ Lender's attorney fees
~ Buyer's attorney fees
~ Appraisal fee
~
Credit Report
~ Lender's inspection fee
~ Mortgage broker commission or fee
~ Tax service fee
~ Processing fee
~ Underwriting fee
~ Wire Transfer fee
~ Interest from the day of settlement to the date of the first mortgage payment
~ Private mortgage insurance premiums to protect your lender ($750 to $1750)
~ Hazard insurance premiums
~ Property taxes from the day of settlement to the end of the tax year
~ Settlement or closing/escrow fee
~ Document preparation fee
~
Notary fee
~ Title search and title insurance to protect your lender ($400 to $600)
~ Title insurance to protect you
~ Recording fees
~ Tax stamps
~ Pest inspection

Property taxes placed in an escrow account are one of the largest expenses at closing. The amount depends on the value of the house you buy and the tax rate in the town or county where the house is located. Many lenders require you to include a monthly estimate with your mortgage payments equal to 1/12th of your annual property taxes and homeowners insurance. For most people, this is easier than coming up with a large lump sum each year when taxes are due.

There is alot of information to take in, especially if you are a first time home buyer. Stay educated and don't be taken advantage of at closing, and don't go to closing unprepared. Choose a realtor that will walk you through the entire process who will educate you about the ins and outs of home buying! Contact us with any questions, we would love to help!

 

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Understanding Escrow

by Allyson Hoffman

Escrow is part of the process when you are  purchasing a Northern Illinois home.  Many first time homebuyers have many questions about the escrow process. Here is some information to make it a little easier to understand.

What is an escrow?
An escrow is an arrangement in which a disinterested third party, called an escrow holder, holds legal documents and funds on behalf of a buyer and seller, and distributes them according to the buyer’s and seller’s instructions. The escrow becomes the depository for all monies, instructions and documents pertaining to the purchase of your home.

How does the escrow process work?

The escrow is a depository for all monies, instructions and documents necessary for the purchase of the home, including  funds for the down payment, lender’s funds and documents for the new loan. The duties of an escrow holder include: following the instructions given by the principals and parties to the transaction in a timely manner; handling the funds and/or documents in accordance with instructions; paying all bills as authorized;  closing the escrow only when all terms and conditions have been met; and, distributing the funds in accordance with instructions.

Do I need documentation?
Receipt of your deposit is generally included in your copy of your purchase contract. Your funds will then be deposited in your separate escrow or trust account and processed through your
local bank.

What information will I have to provide?
Typically you will be asked to complete a statement of identity as part of the necessary paperwork. Because many people have the same name, the statement of identity is to identify the specific person in the transaction through such information as date of birth, social security number, etc. This information is kept confidential.

How long is the escrow?
The length of an escrow is determined by the terms of the purchase agreement and can range from a few days to several months. Typically an escrow often takes an average time of 30 to 45 days.

When does the escrow process end?

The day you actually close on your home, the escrow process ends. This is when all the funds are transferred where they need to be and all the documents are signed and you get the keys to your North Shore dream home!

Image courtesy of www.gotcredit.com/Flickr.com

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What is a Piggyback Loan?

by Allyson Hoffman

Have you ever heard of a “piggyback loan?' This is a home financing option where the property is purchased using more than one mortgage from two or more lenders.  While there are many variations, the piggyback loan which is also known as the 80-10-10 loan, can be typically defined as a 10 percent second mortgage coupled with a traditional 80 percent first lien and a 10 percent down payment.  This loan can be mixed in a variety of different ways to make up the difference between a conventional loan and almost any amount of down payment.

A piggyback loan is basically a second mortgage that they give you at the time of a home purchase or refinance.  These types of loans allow you, the home buyer, acquire or refinance a home with less than a 20 percent down payment or equity. One advantage to this style of loan is that the homebuyer isn’t required to carry private mortgage insurance.

Homebuyers can also use this piggyback loan as a source of funding for making a bigger downpayment on their new home. This can be to their advantage because private mortgage insurance can be quite expensive and it is not tax deductible.

 Image courtesy of www.gotcredit.com/Flickr.com 

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No Surprises on Closing Day

by Allyson Hoffman

The home buying process can be stressful and confusing if you are not familiar with the steps and costs involved in this life changing transaction. A common aspect sometimes overlooked by buyers and sellers is the specifics and the amounts involved with closing costs.

If you are aware of these specific costs and budget for them, they won’t surprise you on closing day and cause you financial stress.

Below is a guide to some of the more standard costs that you may be faced with on closing day.

  • Loan Origination Fee or Points: These are the fees charged by the lender for generating your loan.
  • Broker Fee: These fees are occasionally combined into the Loan Origination Fee.
  • Credit Report: Lenders may require this fee up front to obtain and review your credit history. (Approx. $21 - $60)
  • Appraisal Fee: This fee is normally non-refundable and will vary depending on the value of the home.
  • Inspection Fee: Fees paid to have a Certified Home Inspector evaluate the structural and mechanical condition of the home.
  • Title Search: This search will provide verification that the seller owns the house you are buying.
  • Title Insurance: This fee insures against losses as a result of any title defects.
  • Prepaid Interest : To pay up the mortgage interest to the first of the following month.
  • Mortgage Insurance: Insurance to protect the lender in the event that the borrower (mortgagor) is unable to repay the loan.

These are some of the most common costs involved with closing. Once you have applied for your loan, the lender will provide you with a Good Faith Estimate of what they anticipate the closing costs to be.

Be sure to do your homework and ask extensive questions about these items and your closing will go much smoother and uneventful on closing day.

For more Home Finance information, visit my Finance Information page or Contact Me should you require additional information.

 

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Inexpensive Kitchen Improvements

by Allyson Hoffman

If you have made the decision to sell your home and are wanting to make some improvments, you should know which room to put your most effort into. According to Remodeling Online’s 2005 Cost vs. Value Report, your best bet is the kitchen. Even a minor kitchen remodeling project will return an average of 98.5% of its cost when it comes time to sell the home.

If your want to update and freshen up your kitchen but a complete remodel is not in the budget, consider these below kitchen fixes to help sell your home faster and for more money:

1. Paint or re-stain worn wood cabinets.

2. Install cabinet hardware. Stay with simple and neutral hardware, avoid large clunky designs.

3. Remove outdated or busy wallpaper and any bold, bright paint. Stick with neutral colors.

4. De-clutter all counter tops, keep them free and clear of appliances, butcher blocks and knickknacks.

5. Update the faucets. New faucets can make a outdated sink look revitalized. Faucet replacements are also fairly inexpensive and simple plumbing projects with all of the parts available at your local hardware store.

6. Remove photos, calendars and personal effects from the refrigerator door.

7. Updated and simple rugs and towels with a splash of color can bring warmth to a kitchen.


Replacing outdated appliances and flooring are great improvements that should be considered but may not always be part of your budget. Keeping a kitchen clean and maximizing space is key to getting buyers interested. Always remember to keep garbage cans, and pet bowls etc. out of sight.

Image courtesy of Nancy Hugo, CKD/Flickr.com

Chicago is A Green City!

by Allyson Hoffman

In a recent article, Realtor.com featured 10 top "green" cities that put clean air, clean water, renewable energy and green public transportation first. Chicago was on that list!

Chicago offers it's residents renewable and sustainable energy as well as a commitment to improve the standard of living. Our city also has 42 green-certified building projects, with more to come.

Eventhough Chicago is already green, the city aspires to improve even more and hopes to buy 20 percent of its electricity from renewable energy sources this year. Local officials also will offer tax incentives to homeowners who invest in Chicago’s many historic homes and retrofit them with energy efficient heating and cooling systems.

Tourism is also "green". Many people are unaware that all of the city’s nine museums and the Art Institute of Chicago have been converted to run partially on solar power. Boaters and swimmers who enjoy the city's lakefront will be happy to know that the water quality is rated as excellent by the Natural Resources Defense Council.

Image courtesy of p.Gordon/Flickr.com

Avoiding Common Mortgage Mistakes

by Allyson Hoffman

During the home buying process you will eventually need to obtain financing. This can be confusing and it can be easy to make mistakes, especially if you are a first time homebuyer. Below are some tips you can follow to avoid making some of the most common mortgage mistakes.

1.Do your research on the different mortgage options. You want to make sure to select the right financing for you and not one that will hold you down for even a short period of time with the wrong mortgage. It is vital to investigate all your options, then crunch the numbers and weigh your options.  Be sure to look at initial interest rates, future interest rates and payments (if different), and the possibility of prepayment penalties.

2. Avoid excessive credit. Having too much credit is almost as bad as having bad credit. Lenders will focus on this even if you pay your bills on time and you could get turned down for a mortgage. Postpone any big ticket purchases until after you buy your house.

3. Be truthful on your loan application. While this may seem like a no brainer, even if you exaggerate your income slightly or stretch the truth on other questions, it is a federal offense. While it is rare that you would get arrested, it can cause big problems down the road if the lender finds out. Lenders they can call your loan due and payable. Remember to never sign your name to a loan application that is not completely filled out, you will be held responsible for anything on the application.

4. Not fixing your credit. Even before you even think about applying for a mortgage, obtain copies of your credit report and your FICO credit score. Your FICO score is the three-digit number that's used in 75% of mortgage-lending decisions. Dong this at least six months in advance should give you plenty of time to correct any errors on your report and ensure that they're removed by the time you're ready to apply for a loan.

Image courtesy of www.401kcalculator.org/Flickr.com

Piggyback Loans

by Allyson Hoffman

A "piggyback loan" is a home financing option in which a property is purchased using more than one mortgage from two or more lenders. While there are many variations, the piggyback loan, also known as the 80-10-10 loan can typically be defined as a 10 percent second mortgage coupled with a traditional 80 percent first lien and a 10 percent down payment, hence the 80-10-10. But this type of a loan can be mixed in different variation to make up the difference between a conventional loan and almost any amount of down payment. Other examples are an 80-5-15 or the 80-20 loan.

A piggyback loan is basically a second mortgage given at the time of a home purchase or a refinance. This type of a loan allows the home buyer to acquire or refinance a home with less than a 20 percent down payment or equity. An advantage to this type of loan is that the homebuyer does not need to carry private mortgage insurance (PMI). 

Homebuyers can also use piggyback loans as a source of funding for making a bigger downpayment on the new home. Homeowners who don't have the funds to make the 20 percent downpayment can use this loan to their advantage because private mortgage insurance can be expensive and is not tax deductible. 

Image courtesy of www.gotcredit.com/Flickr.com 

The Escrow Process

by Allyson Hoffman

When purchasing a home, part of the process to complete the sale is when the potential homeowner will enter into escrow. Many first time homebuyers have many questions about the escrow process. Below are some clarification and information on this important process. 

What is an escrow?
An escrow is an arrangement in which a disinterested third party, called a escrow holder, holds legal documents and funds on behalf of a buyer and seller, and distributes them according to the buyer’s and seller’s instructions. The escrow becomes the depository for all monies, instructions and documents pertaining to the purchase of your home.

How does the escrow process work?

The escrow is a depository for all monies, instructions and documents necessary for the purchase of the home, including  funds for the down payment, lender’s funds and documents for the new loan. The duties of an escrow holder include: following the instructions given by the principals and parties to the transaction in a timely manner; handling the funds and/or documents in accordance with instructions; paying all bills as authorized;  closing the escrow only when all terms and conditions have been met; and, distributing the funds in accordance with instructions.

Do I need documentation?
Receipt of your deposit is generally included in your copy of your purchase contract. Your funds will then be deposited in your separate escrow or trust account and processed through your local bank.

What information will I have to provide?
Typically you will be asked to complete a statement of identity as part of the necessary paperwork. Because many people have the same name, the statement of identity is to identify the specific person in the transaction through such information as date of birth, social security number, etc. This information is kept confidential.

How long is the escrow?
The length of an escrow is determined by the terms of the purchase agreement and can range from a few days to several months. Typically an escrow often takes an average time of 30 to 45 days.

When does the escrow process end?

The escrow process ends when you actually close on the home, during the closing procedure. This is when all funds are transferred accordingly, when all documents are signed, and when you get the keys to your new home.

Image courtesy of www.gotcredit.com/Flickr.com

 

Expenses To Expect When Selling Your Home

by Allyson Hoffman

It is a known fact that when you purchase a homeyou will have many different expenses related to the sale. It is important to know as well that when you sell your home, you will also have expenses that will be required. Below is a list of some of the most common costs that come with selling your home.

Closing Costs: Although most of the closing costs are the responsibility of the buyer, the seller is expected to pay the property taxes and insurance up to the date of the closing, even if they're not due yet. in addition, some buyers will ask the seller for help with other closing costs as part of the negotiations.

Realtor Commission: Typically there's a 4 percent to 7 percent commission on the sale price of the house if you opt to go with an agent. Usually this rate is between 5 percent and 6 percent, so be sure to account for this cost when pricing your home and figuring up your expenses that come with selling your home.

Home Inspections: Although the buyer pays for the home and pest inspections, it's a good idea to get your own inspection before putting your house on the market. This way you're aware of any hidden problems before selling.

Legal expenses: Even if you are using a real estate professional and not selling your home yourself, you still may want an attorney to examine the sales contract and assist with closing, which can be complicated.

Prepayment penalty: Many mortgages have prepayment penalties if you pay off the mortgage early. Be sure to examine your mortgage agreement and read the fine print.


Many homeowners are not aware of the costs involved with selling a home but there are some perks as well. With any home sale you are eligible for a tax write off of up to $250,000 gained in the sale of your home for a single owner, and $500,000 for married couples. This applies for most state taxes as well; check with a tax professional to get all the details of any tax credit that may be available to you and your situation. 

Photo courtesy Sufi Nawaz, Stock.XCHNG.

Displaying blog entries 1-10 of 12

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Allyson Hoffman
RE/MAX Villager
1245 Waukegan Road
Glenview IL 60025
847-310-5300
Fax: 847-400-0881

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Allyson Hoffman
RE/MAX Villager
1245 Waukegan Road
Glenview, IL, 60025

(847) 310-5300
[email protected]

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