Lee Morof's Real Estate Blog

You know you’re going to pay a mortgage for however many years once you sign the paper on a Bloomfield Hills home. You know your agent is going to get paid for the absolutely wonderful, fantabulous, expert job he or she did to help you find the home of your dreams. What you may not be expecting, however, are the closing costs. 

The saying goes “nothing’s guaranteed except death and taxes,” but you can add “closing costs” in there. Now, I’m sure the mortgage was expected, and you don’t mind your agent earning a bit, but what the heck is this “closing cost” business? While the government forms explain them, they might as well have been written in chicken scratches; government lingo has never been exactly easy to understand.

Be Prepared to Pay
“Closing costs” is a catch all term for all the expenses that wouldn’t fit under a convenient title like “mortgage.” Be prepared, because they can range anywhere from 3% to 8% of your total loan. For example, if you have a $150,000 loan, your closing costs could be anywhere from an additional $4,500 to $12,000.

What are you paying for?
Aren’t you already paying for the Bloomfield Hills home? What’s with these closing costs? It probably feels like hidden fees, but they aren’t. Here are just a few of the fees you might end up paying, depending on the lender and the circumstances:

• Prorations – The allocation of property taxes, interest, Home Owner Association dues, insurance premiums or rental income between buyer and seller proportionate to time of use.  For example, if the property tax is paid up to a period after you close on the house, the seller might be entitled to reimbursement.

• Appraisal Fee – The fee charged for a written appraisal by a qualified person setting forth an opinion of a property’s fair market value.

• Fire Insurance – Just in case you burn the house down after you buy it, lenders might require you to have a fire insurance policy.

• Purchase Points – These are known as “discount points,” or just “points,” but it’s more like “pay the lender less now or pay the lender more later.” Each point costs 1% of your loan amount and reduces your interest rate for the life of your loan (usually by fractions of percentages). Since it can take a few years for the lower payment difference to offset the initial closing cost, paying for points is probably only a good idea if you plan to live in the house for five years or longer.  With interest rates as low as they are now, it may not be a good use of your hard earned income.

The good news is you won’t have to guess what the closing costs are for your new Bloomfield Hills home. The lender is required to give you a list of the closing costs and the potential cost of each, so you won’t be completely surprised.

If you have questions closing costs or any other real estate related questions, I’m happy to help. Call me today at 248-514-2640 or email me at info@NorthWoodwardHomes.com.

Lee Morof
Associate Broker/Attorney
RE/MAX Showcase Homes
Birmingham, Michigan
www.NorthWoodwardHomes.com
info@NorthWoodwardHomes.com
Call:  248-514-2640

Good credit is more important than ever, if you want to get a Bloomfield Hills real estate loan.   Knowing what’s on your credit report and how lenders view various aspects of your report is crucial.

First Things First
Get a copy of your credit report from all three of the credit reporting companies: Equifax, Experian, and TransUnion. You are entitled to one free report every year from each of the three credit reporting companies.  Whether you’re considering getting a loan or not, you should always take advantage of that opportunity to make sure your credit reports are accurate.

Range
FICO® scores range from 365 to 840. While the standards for what lenders consider a “good” FICO® score changes constantly and varies by lender, here’s a general breakdown of today’s standards:

• Over 750 is excellent and should get you the best terms and rates.
• Under 600 might get you a Bloomfield Hills real estate loan, but you’ll want to shop for the lender who’ll give you the best rates and terms.
• Under 500, you need to brace yourself for waiting until you get your credit in better condition.

What Determines Your Score
There are many things that can affect your score.  Magically (or not), each of the three companies tend to view things just a little differently, which means your score will not be the exact same for all three. That’s why it’s so important to get copies of your report from all of them. However, the two main things that all companies consider in rating your credit score are delinquencies and debt-to-income ratio.

What You Can Do To Immediately Improve Your Score:

• Check the entries: Make sure any debts or delinquencies listed are true. Report any errors.
• Pay off debts: But do not close accounts. Having available credit is good as long as it doesn’t look like you’re over-extended by having your credit maxed out. The lender may worry that you’re living off your credit and can’t afford your bills.

If you would like more tips on how to improve your chances of getting a Bloomfield Hills real estate loan, I can help. Call me today at 248-514-2640 or email me at info@NorthWoodwardHomes.com for more information.

Lee Morof
RE/MAX Showcase Homes
Birmingham, Michigan
www.NorthWoodwardHomes.com
info@NorthWoodwardHomes.com
Call:  248-514-2640

Your Bloomfield Hills REALTOR® may say that you must provide earnest money when making an offer on Bloomfield Hills real estate. It’s usually in the form of a check, and the funds will be verified by your mortgage company prior to final approval of the loan.

This earnest money reassures the home seller you’re indeed serious about the offer you’re making.  Once the terms of the deal are worked out between you and the seller, the earnest money is placed in an account held in trust until your loan closes.  Then the money will be used for your down payment and closing costs. 

What if the Deal Falls Through?

If the deal falls through at any time, any cancellation fees are paid out of the earnest money. The remainder of the money continues to be held in trust until you and the seller agree on the disbursement of the money.  If the deal is canceled early in the process, it’s usually a simple matter of the seller signing over the deposit to you.

What if You Cancel the Transaction?  

If the transaction is canceled by you, the buyer, some sellers mistakenly believe that the earnest money is forfeited to them.  That’s not likely to happen because no buyer is going to let the seller just have the earnest money.  Because the money is held in a trust and both parties must sign a release of escrow, no one can make you give the earnest money away.  In this situation, work with your Bloomfield Hills real estate agent to help you negotiate the return of your earnest money.

What if an Agreement Cannot Be Reached?

If the buyer and the seller are unable to come to an agreement about the earnest money, the broker holding the funds in trust can make a written judgment and disburse the money.  If the broker is unable to make a determination, he or she can turn the money over to the State’s real estate commission to make a decision.  Rarely does a court of law have to be involved.

For more information on earnest money or answers to any other questions you have about buying Bloomfield Hills real estate, call me at 248-514-2640 or email info@NorthWoodwardHomes.com.

Lee Morof
RE/MAX Showcase Homes
Birmingham, Michigan
www.NorthWoodwardHomes.com
info@NorthWoodwardHomes.com
Call:  248-514-2640