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Financing Your Home
Once you’ve done your homework and know how much you can afford to pay for a house and associated expenses, the next step is to work with a bank, savings and loan, or credit union to determine how you will finance, or pay for, your new home.
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You will need to know about many different costs associated with financing
a house. Following are some of those expenses that you
will be expected to pay for in addition to the cost of
the house:
- Appraisal fee – The cost for
an estimate of the value of a property given by a qualified
person, usually after an inspection of the property.
- Closing costs – Money paid to
complete the home-buying transaction that is over and
above the purchase price. Sometimes closing costs can
be added to the amount of your loan and may include:
legal fees, taxes, mortgage application charges, interest
adjustments, registration fees, appraisal fees, etc.
- Credit report fee – The charge
for ordering a copy of your credit report, which gives
the lender an evaluation of your ability to manage debt
based on an analysis of your credit history.
- Escrow account - A form of trust account
in which advance payments are held on your behalf to
pay certain expenses associated with your home, such
as taxes or private mortgage insurance.
- Principal and interest - A blended
payment, usually paid monthly, that is enough to pay
off accumulated interest and a portion of the principal
of your mortgage loan.
- Private mortgage insurance (PMI) – An
insurance policy issued by a company to protect a lender
against the default of the borrower. PMI is usually waived
once the loan amount drops to 80 percent of the value
of the home.
- Title insurance fee – The cost
to secure insurance that protects property buyers and
lenders from problems that might affect real estate title
ownership.
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