Are you planning on taking out a loan with Rocket Mortgage? Besides gathering the required documents, and enough funds for a downpayment, there are certain fees you can expect to pay.
Here’s an overview of the Rocket Mortgage closing costs, so you can know exactly what to expect.
Rocket Mortgage closing costs are the sum of the processing fees you will pay to the lender before finalizing the loan. They are used to cover expenses like researching the house title and appraisal. The total sum will depend on the state you live in and on the type of loan.
There’s one thing that you should keep in mind – closing costs and down payment are two different things. However, you are expected to pay these fees before you finalize the loan, but know that they can be negotiated with the lender.
Closing Costs With Rocket Mortgage
If you are buying a home for the first time in your life, a mortgage loan and everything related to it are unknown. The required documents and down payment are not the only things you should consider when applying for a loan to purchase a property.
Understanding each step and fee that you are expected to pay is essential, so there are no surprises because you’ve underestimated the sum.
When you apply for a mortgage loan from Rocket Mortgage, they will include the fees for their services into the closing costs. These are the expenses for processing and creating the loan, and they cover a variety of things, like the appraisal of the home and research on the property’s title.
However, there are no fixed sums you can expect to pay, and the costs will depend on the state where you are located and the type of loan.
The total sum of the expenses your lender will expect depends on how much mortgage you can afford. It can make up around 3 to 6% of the price of the home you are purchasing, so if you are taking a loan worth $300,000, your costs will be between $9,000 and $18,000.
These fees are not included in the down payment but can be negotiated with the seller. They can cover a part of those fees or the whole sum. However, you should be aware that some factors can influence your negotiating power, and one of the major ones is the type of market you are in.
Depending on your location within the US, the expenses related to the finalization of your mortgage can vary to a great extent. The table below shows how much you’ll pay in several states, with or without taxes.
|State||Closing costs plus taxes (average)||Closing costs without taxes (average)|
Who Pays? The Buyer or the Seller?
While both the buyer of a property and the seller pay a part of the finalizing fees, it is the buyer who pays the majority of the sum. However, you can negotiate with the seller about splitting those costs more evenly and for them to cover what is called the seller concessions.
It can be really helpful if you are tight on the budget and you are not sure whether you can come up with the required amount.
But even if you manage to negotiate the expenses with the seller, you should still acknowledge the fact that there’s a limit on the amount they can contribute.
Depending on the type of loan, how high the occupancy is, and the amount of the down payment, they will be able to cover up to a certain percentage.
Sellers can only contribute to paying for the finalizing fees up to a certain percentage of the mortgage value.
When it comes to conventional loans, the percentage is based on the appraised value or the price you’ve paid on the purchase, whichever of the two is lower. Here’s a breakdown of those limits:
- If the downpayment is 25% or more, the set limit for the seller is 9% (for a primary residence).
- When it comes to down payments that range from 10% to 24.99%, the limit is 6% (for a primary residence).
- If the buyer has given a downpayment that is less than 10%, the seller has a limit of 3% for covering the closing costs on a primary residence.
- If it’s a second home in question, a seller may cover up to 9% for a downpayment of 25% or more.
- For a second home where the down payment was between 10% and 24.99%, a seller may pay up to 6% of the finalizing expenses.
- For an investment property, the situation is a bit different. The maximum sum of the concessions is 2%, no matter how high the downpayment was.
FHA loans are mortgages backed by the Federal Housing Administration. It is an agency that falls under the jurisdiction of the Department of Housing and Urban Development, and they are insured by the FHA. These mortgages are federal loans that offer low down payment solutions and lower limits on the credit score.
However, these loans include the mortgage insurance costs you should pay for. When it comes to the seller’s concessions with these loans, the terms are much more straightforward. The limit is 6% of the price of the home or the appraised value, whichever is lower.
VA loans are backed by the Department of Veterans Affairs, and they are also government loans. It’s a benefit available for service members, veterans, and surviving spouses.
If you fall under one of these categories, you are eligible for a low-cost mortgage, whether you’re buying or refinancing. It is available even if your credit score is low.
The Department of Veterans Affairs doesn’t give out these loans, but they are the ones that determine who qualifies and which lender can issue them. When it comes to concessions, VA loans have a set of different rules.
There’s a limit of 4% of the price or appraised value (the one that is lower of the two) that can be directed towards escrow accounts which are used for homeowners insurance and prepaid taxes.
An unlimited amount of funds can be contributed to discount points, surveys, home appraisals, origination costs, and credit report expenses. Additionally, limits on seller concessions for loans like Rocket Mortgage’s Jumbo loans may vary by lender.
Without a doubt one of the most essential aspects to consider when it comes to shopping for a home loan is the closing costs.
Bill Gassett, owner of Maximum Real Estate Exposure, “says one of the most vital questions to ask a lender is their breakdown of closing costs. Most home buyers will pay somewhere between 3-6 percent of the homes purchase price. The high to low of what a lender may charge could make a difference.
It will be crucial to have this information early on in the process to make a sound decision. Lenders are now required to provide prospective buyers a loan estimate that includes closing costs within 3 days of applying for the loan. Lenders are also required to provide a closing disclosure three days prior to closing which provides a breakdown of costs associated with the mortgage.”
Let’s take a closer look at the expected seller concessions based on a conventional loan of $300,000.
Presumably, you’ve made a downpayment of less than 10%. In that case, a seller can only contribute up to 3% to the finalizing expenses, which is $9,000.
If the closing fees required by the lender are less than 3%, the seller can cover only up to 100% of their sum. So even if the costs are $3,500, the seller is limited to that amount – this is done to prevent fraud.
A Buyer Should Be Aware of the Expected Closing Costs and the Fees Included
When it comes to the fees you will pay to the lender before finalizing the mortgage loan, the amount can vary depending on a number of things. All the included costs consist of those that are lender requirements, others are demanded by the government, and there can be optional ones, too.
The optional fees will depend on where you are located, which lender you have chosen, and the type of mortgage loan you are taking.
No matter which lender you have chosen, you will be given a document by the lender at least three business days before the closing date. This is called the Closing Disclosure, and it will list each and every fee you are required to cover with a total sum of how much you owe. Here are the included costs found in the document:
- The application fee,
- Home appraisal costs,
- Lead-based paint inspection,
- Pest inspection,
- Attorney fees,
- Credit report costs,
- Loan origination fee,
- Closing fee,
- Escrow funds,
- Courier fee,
- Discount points,
- Lender’s title insurance,
- Owner’s title insurance,
- FHA mortgage insurance (if applicable),
- Homeowners Association transfer fee,
- Homeowners insurance,
- Flood certification,
- Prepaid daily interest costs,
- Private mortgage insurance,
- The property tax,
- Rate lock fee,
- Survey fee,
- Recording fee,
- Title search expenses,
- Tax monitoring and tax status research,
- Transfer tax,
- Underwriting fee,
- VA funding fee (if purchasing a home with a VA mortgage loan).
I’ll try and break down some of these expenses, so you can easily identify how and why you are paying them before finalizing the deal.
When you apply for a loan to buy a house, not only should you know and understand whether a mortgage is a loan agreement, but you also expect certain common and uncommon costs.
Some lenders may charge you an application fee to process the loan, and these costs can vary from one lending institution to another. They can be as high as $500. They can charge this sum either as a separate fee or include it as a deposit and direct it later towards other closing expenses.
It’s nonrefundable, even in the case where you are turned down for the loan.
The appraisal is an important part of the mortgage process. It’s when a real estate appraiser is called up to determine the fair value of a home on the market.
This is done to assure both you as a buyer and your lender that the agreed price is fair. They can also be used to establish the amount you’ll pay for the property taxes, which makes them a requirement in most states.
The appraisal is ordered by the lender through a third-party appraisal management enterprise. After the appraisal is ordered, the management company will send a professional appraiser to inspect the home in question and determine the true price of the property.
Besides figuring out the fair price of the asset, they will run some basic safety inspections and ensure that it is ready for a move-in. This is important for the buyer for several reasons, but mostly because an appraisal determines the amount you can borrow from the lenders.
Another essential benefit is that it will help you avoid overpaying for the asset. These fees will usually be set somewhere between $300 and $600, but be aware that the costs can be even higher.
Before you get approved for a loan needed to buy a property, your lender will have to pull out your credit report to determine the credit score. The fee that covers this expense is around $25 in most cases. The courier fees are the costs of transporting various mortgage documents, and they are about $30 with those lenders that charge them.
A closing fee is a cost you pay for the attorney or the escrow company that is conducting your closing meeting. Some states require an attorney to be present and sign off on every closing, but the costs will vary depending on your location.
Additionally, if an attorney is coordinating the closing and drawing up the required paperwork, you will be required to pay a separate fee.
First of all, you should understand what an escrow is. It is a legal arrangement in which a third party temporarily holds a certain amount of money or property until a particular condition is fulfilled.
In the case of mortgages, these funds are often referred to as prepaids or reserve fees, and they are used for a number of things they can cover.
Your lender will keep this money in a separate account and will use them to cover premiums, property taxes, mortgage, and homeowner’s insurance. These payments will be made on your behalf and will be part of your regular payment for the mortgage.
Not only is it wise to get a policy on your home as a type of protection that allows you to compensate for any type of damage, but it is also usually required by most lenders.
It can be one of the conditions for your loan, but you may also protect the contents of your home, as well as get liability coverage for injuries within the property.
Transferring the HOA fees is yet another step of the process that may be applied to you. But, first off, let me explain what these fees imply. HOA or a Homeowner’s Association are private organizations that oversee the management of residential communities.
They work on establishing the set of regulations and rules regarding that community and are often in charge of condominiums, master-planned neighborhoods, and the like.
By paying the fee to get them transferred, the burden of these costs will pass from the seller to the buyer. However, you may avoid paying for them if you’ve agreed with the seller to cover their cost.
Processing of the mortgage loan itself, as well as the underwriting, comes with its own costs. You will cover them by paying the loan origination fees, and the funds will go to the lender in exchange for underwriting and creating all the paperwork regarding the mortgage.
The expected sum is around 1% of the value of the loan.
Unlike any other type of insurance, the lender’s title insurance is paid for only once, at closing. It’s a separate coverage from the owner’s title insurance, and it is used to repay the bank if you lose the property due to a title claim.
The amount may go up to $875. The following video talks about the difference between a lender’s title insurance and an owner’s title insurance.
Considering this all seems like a lot of work, many are wondering – is a mortgage worth it? I’d say you shouldn’t be bothered by the details, as this is standard bureaucracy. Not only is a mortgage good for your credit score, but it will also help you achieve your first investment and give you a roof over your head.
If you choose your neighborhood with care and some knowledge of the property market, you can sell your house later for a larger sum. All you need to do is make some improvements and repairs (perhaps with a Rocket Mortgage cash-out program) and flip it right back into the market.