FAQ: Why Do I Have to Pay the Hazard Insurance Premium Up Front?
August 3rd, 2009
Categories:Home Buyer Education
The hazard insurance premium, (also known as homeowner’s insurance) is an interesting topic. While homeowner’s/hazard insurance is commonly looked at as being voluntary on the homeowner’s part, it is typically something the lender will require the homeowner to have. In fact, Arizona’s state banking laws require lenders to collect a year of insurance upfront.
Essentially the lender/bank wants to make sure the home they are loaning you money for is insured against a variety of potentially damaging situations. These situations might range from floods to vandalism. Simply put, if your home gets flooded they want to know insurance is in place to protect your home and their financial investment.
Since the homeowner’s/hazard insurance is usually required by the bank, they will want to have record the home is insured before funding your loan. Hence why they want the premium paid upfront.
When it comes to homeowner’s/hazard insurance i would recommend talking with your insurance agent to determine the best policy. The most common homeowner’s/hazard insurance policy is referred to as a “basic form”. There is also a “broad form” available that covers a larger list of items.
Here’s a list of the most common items you will find in each form Read the rest of this entry »
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What Closing Costs Do You Have to Pay for at the Closing Table?
July 21st, 2009
Categories:Home Buyer Education
This question was sent to me twice last week, so I thought I would post the answer in blog for anyone else looking for this answer.
Below you’ll find a laundry list of the fees you will most likely see in a real estate transaction. When deciding who pays for what fees, that will depend on what you negotiate when you agree to buy or sell the home. In this market, its a common misconception the seller pays for all the closing costs. While it happens a good deal of the time, it is still very common to see a buyer willing to pay their own costs.
When it comes to negotiating a purchase offer you’ll find one of two scenarios typically play out with the closing costs. Scenario One: The seller pays the closing costs and the sale price of the home remains the same or increases (to justify the amount of the closing costs). Scenario Two: The seller doesn’t pay any closing costs, but they decide to lower the purchase price of the home. Its normally a matter of how much cash the buyer wants to bring to the closing table.
Closing costs will vary from transaction to transaction based on 4 main factors:
- The state you are buying or selling a home in
- The fees charged by the title company
- The fees charged by the lender
- The terms agreed upon in the contract
I’ll break down some of the more common fees into sections. These fees are commonly broken down in a Good Faith Estimate (GFE) and in the HUD-1. The GFE will be given to you by your loan officer before you write a contract (ideally). The numbers on the GFE will only be estimates, hence the “E” in GFE. =) The HUD-1 will come about three to five days before closing and will contain Read the rest of this entry »
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