COSTS

Down payments vary depending on the type of loan program selected. The FHA down payments are comparatively minimal, designed for a first-time buyer. FHA will permit the down payment to be a gift from the family.

The minimum down payment on a Conventional loan varies depending on the program. Conventional programs offer up to 100% financing with as little as $500 into the transaction from the borrower s own funds. With a down payment of 20% or more of the sales price, the entire amount can come from a gift. At 20% down, most Conventional loans do not require insurance against default.

VA loans may be financed with zero down payment if the correct guidelines are met.

Points are dollars paid to lending institutions at the time of closing to allow lenders to make loans at rates lower than existing money market conditions warrant. Points balance the yield or rate of return lenders get on money they loan.

One point equals 1% of a new loan amount. If you wish to finance your loan at a lower rate, you may pay points to buy that rate. Note that the points are calculated on the amount of the new loan, not the selling price of the property.

The cost of borrowing money fluctuates according to the demand for money and the supply of money available at any given time. Heavy demands have a major effect on the availability of money. The result is that the supply of money for the home mortgage market is lessened as it competes for available funds. As the availability of money fluctuate so do the points necessary to allow lenders to place their money in the home mortgage area.

Points needed to obtain FHA, VA or Conventional financing may be paid by either the buyer or the seller and are therefore negotiable. (FHA, however, limits the seller contribution to a maximum number of points.) Because, in many instances, buyers cannot afford financing when they must also pay points, sellers often see their best interests served by agreeing to pay some or all of the points needed. There are some limitations to the amount of seller contribution under all programs. Please consult you lender.

Points are tax deductible for the borrower whether they are buyer or seller paid.

Closing costs vary slightly with the range of loan programs. Variables are loan amount, origination fee, title insurance and mortgage registration tax.

The prepaid expenses include interest paid from the day of closing to the end of that month. This category also includes the first year s homeowner s insurance, the first year s private mortgage insurance premium on an insured Conventional loan and any tax and/or insurance escrows.