I saw an article from CBS this week I know a lot of people will relate to: the costs that can blindside new homeowners. The articles notes that there are fees and services the client can shop around. These services are:
Mortgage: Often times borrowers only see the interest rate offered by lenders and don’t take into account the fees associated with the loan process. Yes, when shopping for a lender, borrowers should compare the interest rate, but they should also look at the origination/discount points and underwriting/administrative fees. The additional fees can impact closing costs.
Closing Attorney/Title Company: Attorneys and title companies make sure there’s a clean and legitimate title to the property. They also issue lender and owner title insurance. Those fees are part of the buyers closing costs.
Homeowners Insurance: The borrower has the right to choose his/her own insurance carrier as long as the coverage meets lender requirements. According to Fannie Mae, there’s one main rule:
- “Insurance must protect against loss and damage from fire, wind, civil commotion, smoke, a windstorm, a hurricane and hail. The coverage must also protect from damage caused by an aircraft, a vehicle and an explosion.”
I often see homebuyers wait until the last minute to choose a homeowner’s insurance plan, which can hold up the loan process. Lenders need to make sure there’s enough coverage and that it meets the guidelines.
Homebuyers must understand their options and rights when purchasing a home.
Photo courtesy of Bev Sykes (Flickr)