Earlier closings may be in home buyers’ best interest
Many home buyers, especially first-time buyers, choose to close escrow as close to the end of the month as possible in order to avoid paying a large sum of cash at closing. However, waiting until the end of the month to close escrow can result in mistakes being made during the loan funding process due to the large volume of paperwork required when purchasing a home, and the short amount of time allotted to close.
MAKING SENSE OF THE STORY FOR CONSUMERS
• Approximately 95 percent of all real estate closings take place during the last week in the month because mortgage interest is collected in arrears, meaning the principal and interest payment is due for the interest accrued during the previous 30-day period. The fewer days that are left in the month when escrow closes, the less upfront interest the borrower has to pay at closing.
• The later in the month that a loan closes, the earlier the first full mortgage payment will be due. To avoid paying a large sum of money at closing and then paying a full mortgage payment a few days later, some real estate experts advise clients to close earlier in the month if possible. Providing the lender with additional time to process the paperwork also will help ensure that mistakes aren’t made that could jeopardize funding the loan on time.
• Cash flow can be a challenge for some borrowers; so many lenders offer a credit for the mortgage interest due at closing if the loan closes early in the month. The exact date differs by lender and is determined by the type of loan. If the mortgage is insured by the Federal Housing Administration (FHA) or guaranteed by the Dept. of Veterans Affairs, a borrower can receive a credit for closing by the 7th of the month. With a conventional mortgage, the credit is typically available if the borrower settles by the 10th of the month.
To read the full story, please click here:
http://www.latimes.com/business/la-fi-lew23-2008nov23,0,5616331.story
Earlier closings may be in home buyers’ best interest
• Approximately 95 percent of all real estate closings take place during the last week in the month because mortgage interest is collected in arrears, meaning the principal and interest payment is due for the interest accrued during the previous 30-day period. The fewer days that are left in the month when escrow closes, the less upfront interest the borrower has to pay at closing.
• The later in the month that a loan closes, the earlier the first full mortgage payment will be due. To avoid paying a large sum of money at closing and then paying a full mortgage payment a few days later, some real estate experts advise clients to close earlier in the month if possible. Providing the lender with additional time to process the paperwork also will help ensure that mistakes aren’t made that could jeopardize funding the loan on time.
• Cash flow can be a challenge for some borrowers; so many lenders offer a credit for the mortgage interest due at closing if the loan closes early in the month. The exact date differs by lender and is determined by the type of loan. If the mortgage is insured by the Federal Housing Administration (FHA) or guaranteed by the Dept. of Veterans Affairs, a borrower can receive a credit for closing by the 7th of the month. With a conventional mortgage, the credit is typically available if the borrower settles by the 10th of the month.
To read the full story, please click here:
http://www.latimes.com/business/la-fi-lew23-2008nov23,0,5616331.story
