Home Buyers and Sellers Questions

A very good friend of mine, Anthony Frascone with Wells Fargo, sent me some information for BUYERS and SELLERS in New York or Connecticut. 

Some answers to typical Buyers and Sellers questions:

 Do I have to attend the closing?

It is usually expected that all parties attend the closing so that any problems that may occur are appropriately addressed. It is not unusual for the sellers not to attend and they typically pre sign the closing documents and give a power of attorney to the lawyer representing them. However, it is most uncommon for buyers not to attend the closing since many lenders require a borrower to attend a closing. Exceptions can be made but only if a lender gives prior permission and the lender approves the form of the power of attorney required to close in absentia. If there is no lender, then it is usually acceptable.

What is Title Insurance and do I need it?

Title Insurance protects against problems in the title to your property. Mortgage lenders now require all borrowers to buy “Mortgagee” title insurance that protects the bank for the full amount of the mortgage in case of title problems (such as Indian claims, unreleased mortgages, forgeries, etc.). An “Owners” title policy protects the owner’s equity. Premiums are set by the Insurance Department and vary depending upon the amount of coverage required. It is paid at closing and its is paid only once. However, upon refinancing, the new lender will again require a new mortgagee policy (to be sure there have been no intervening encumbrances). Discounts for the new mortgagee policy at refinance may be available, depending when the original title insurance policy was issued.

What are typical expenses to the seller?

The Seller’s expense is a real estate broker’s fee which is usually 5% to 6% of the sales price. The Seller also has to pay a conveyance tax to the State of Connecticut equal to ½% (except when the property is worth more than $800,000.00 or when it is a commercial type of real estate). There is also a town tax equal to $1.10 for every $1,000.00 of sales prices. Typically attorney’s fees range from $500.00 to $750.00. There will be small recording fees.

What are typical expenses to the buyer?
Bank expenses fees including, but not limited to, processing fees, application/appraisal fees, credit reports, tax service fees, document preparation fees are about$1,100.00 in a typical transaction. Above and beyond that, there may be points if the buyer chooses to buy down their mortgage rate. There are usually no point options on most programs except State Bond programs. A point equals 1% of the mortgage loan amount. A Buyer typically pays a title search fee that is approximately $175.00. Title Insurance costs approximately $4.00 per $1,000.00 of coverage. Attorney’s fees for representing a bank are typically in the $400.00 to $500.00 range and for personal representation $100.00 to $250.00 range. Recording fees are typically less than $250.00.  In addition, most banks require that there be an escrow for taxes and insurance and this typically can be as much as 5-7 months’ worth of taxes, depending on when the transaction occurs. In addition to the tax escrow, the Buyer reimburses the Seller for the taxes prepaid by the Seller. It generally works out that between the tax reserve and the amount reimbursable to the Seller, that a Buyer pays 7 months of taxes at time of closing.  The buyer will also have pick up the per diem interest charge based on the closing date.  This varies by loan amount, interest rate and closing date. Closing month’s end reduces this fee.

The Buyer also reimburses the Seller at closing for fuel oil, and most fuel oil tanks are 275 gallons. The tank is usually topped off at time of closing and the Buyer reimburses the Seller for a full tank of oil. Last, but not least, the Buyer may have to pay for mortgage insurance  and the amount of the mortgage insurance varies.

How does selling one’s house and buying a new house work?

Ideally, Sellers sell their home in the morning and purchase their new home with the proceeds from the sale later that same day. An attorney working with the client will make sure that this happens in this sequence. Typically, a Seller gives occupancy to the Buyer at the time of closing. However, in some instances, the Seller cannot give occupancy to the Buyer (because their new home may not be ready for them to move in to). Under those circumstances, a use and occupancy agreement is entered into between the Buyer and the Seller at time of closing whereby a firm date is established for the Seller to move out of their new home while paying a per diem rent typically based on the carrying charges of the Buyer. In a typical use and occupancy agreement, there is an escrow provided and a penalty provided in the event the Seller does not vacate the home at the agreed upon date.

What is Flood Insurance?

This is a special type of insurance that covers future losses due to flooding which losses are not covered by most homeowner’s policies. If your property is located in an area requiring the purchase of flood hazard insurance, the Lender will ask that you demonstrate that you have this insurance and that you have added its name as a loss payee as part of the terms of the financing. As with homeowner’s insurance, flood insurance covers the risk of any loss due to flooding that may occur during the year for which the premium has been paid. A premium is payable each year.

Why should I consider an FHA mortgage?

FHA is becoming a very popular option to both market a home and for borrowers looking for some creativity and flexibility to qualify for their dream home.  FHA mortgages can be both traditional 30yr and 15yr fixed rates, and Adjustable rates with low annual caps are available.  Benefits  to an FHA mortgage are the new expanded lending limits which varies by county, but for single family homes in Fairfield county the new limit is $708,750.  This goes up to $1,363,000 for a 4 family owner occupied home.  Consider FHA if your buyer has debt to income ratios higher than a conforming mortgage would accept.  Conservative banks underwrite to a 38% Debt to Income ratio, while FHA may approve a loan with good compensating factors to 45-55% DTI.  FHA allows the down payment to be 100% gift.  FHA is NOT credit score driven, so if you have a buyer with a 580 score, consider FHA.  FHA does not recognize “soft or distressed” market designations like Fannie Mae or Freddie Mac, so you can still buy with 3% down and get insurance on the loan.  FHA allows for a non-occupant co-borrower income to count 100% toward the transaction, compared to helping just 5% in the ratios with a Fannie or Freddie Loan.  FHA will usually do spot approvals in condominiums with a 51% owner occupancy, where Fannie/Freddie looks for 60% owner occupancy.  FHA offers renovation loans on purchases, so you can take that raised ranch and replace the kitchen, bath, and even add a deck with a hot tub.  Consider an FHA  mortgage, so your seller can structure a deal and give a concession via an approved 3rd party for not only closing costs, but down payment (not allowed in traditional financing). Wells Fargo is the #1 FHA and VA lender in the Country.

Interested in contacting Anthony for more information – Cell: 203~648~6713

Wells Fargo Home Mortgage, the # 1 retail Mortgage Lender in America every year since 1993.
“I strive to give personal concierge service to every client and business partner.  It is always our mission at Wells Fargo to be your lender of choice.  I look forward to assisting you soon.”  Anthony.

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June 13, 2008 - Posted by dianasantos | Buyers, Connecticut, Mortgage, NY, Sellers, Uncategorized | Buyers, Closing Costs, FHA, Home, House, Loans, Mortgage, Mortgage Broker, Purchase, Questions