Mortgage Loans

The housing market is slipping, meaning that you can buy cheap, but you may not be able to get the true worth of your current home out of a sale. A good option, if you are willing to consider it, is keeping your current house as a rental. Another great option is buying a house to “flip”, meaning that you buy a perfectly good house, turn it into a better house through remodeling, fresh paint, and landscaping as necessary, and resell it at a higher rate. Both of these can turn you a great profit, even in a low market. But can you afford to do either?

We’d like to help you answer that question! Every area is different, and a lot of money in Texas might boil down to a condo in some areas of California, so how do you know how much house you can even afford? One of the first things that you should do is look at your equity. You don’t need an appraisal yet, but do estimate the current value of your home and look at what you estimate your equity to be. The ideal amount is enough for closing costs, which you can find with the aid of a calculator on many lenders’ sites, enough for ten to twenty percent of the cost of the loan for a down payment, and a little bit extra to cover emergencies like extra closing costs being tacked on or the dryer falling off the moving truck. Don’t forget to keep some cash on hand for moving if you plan to use a professional company!

Closing is the part of the property-buying process when the contract between the buyer and seller is finalized, when everything is signed, and the property title changes hands. There are a number of costs associated with closing, many of which are part of the mortgage. Some of these costs must be paid in advance of closing, and some are paid at closing. Closing costs will depend on both the amount of money you’re borrowing, and the value of the property you’re purchasing. Closing costs are usually three to six percent of the value of the property.

Costs which are payable in advance are all involved with the mortgage, and are required by the lender to process your application. These include the following:

An escrow account is used during property transactions to protect both the buyer and the seller. The contents of the escrow account are held in safekeeping by an escrow agent, and are released when the contract between the buyer and the seller is executed. This happens only when all the conditions of the contract are met.

The escrow account can be used to hold the following items:

• The buyer’s deposit
• Earnest money (a small deposit paid by the buyer as a show of good faith)
• The title to the property
• Title transfer documents that have been signed by the seller

After the escrow account has been created the buyer and seller have a certain amount of time to place these items in the account (the length of time is predetermined and is part of the contract). The deposit and earnest money are usually paid by cashier’s check or wire transfer to speed up the process. After all the items have been deposited, the buyer and seller have another predetermined period of time in which to fulfill contingencies of the contract. For example, there may be a contingency which stipulates that the seller must carry out some small repairs on the property; they will then use this time to do so.