You’ve done your research and worked with a loan officer to identify how much can you afford to spend. You’ve got an idea of the kind of loan you’d like to use. Now it’s time to gather your documents and get ready to apply.  Click here to see a list of documents you will need to provide to your mortgage company.   

When you’re house hunting, the costs you’re thinking of are probably the sales price of the home or the current interest rates on mortgages—or maybe even the down payment cost. But there’s a lot of costs that go into a mortgage, and it’s important to consider them before you start house hunting. Having a realistic idea of what you’ll be paying will help you determine how much you need to have saved up to afford the house of your dreams

6 COSTS TO CONSIDER Here are the costs (and the things that will affect costs) that you should bear in mind when you’re shopping for a new mortgage:

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1. Purchase Price: Certainly, the biggest single cost will be the cost of the home itself. If you’re trying to determine just what you can afford, this is a good place to start because you can measure many of the associated costs as a percentage of the total purchase price.

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2. Down payment: Though different loan types will require different down payments—and some, like VA loans, may not require one at all—you typically want to put down 20% of the purchase price as a down payment. If you don’t, some loans (but, again, not VA loans) may require you to pay for private mortgage insurance (PMI) to ensure your financial institution gets paid. This is definitely an added cost you’ll want to avoid, so be sure you have an adequate amount saved for your down payment.

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3. Interest Rate: The interest rate is the percentage you’ll pay in interest on the amount you’ve borrowed. Though this may seem a small number compared to some of the others you’ll see in your mortgage considerations that number will add up over time. In a fixed rate mortgage the interest rate is fixed for the life of the loan, but in an adjustable rate mortgage has an interest rate that can adjust over the life of the loan—though an adjustable rate mortgage will typically have a lower initial rate, making them appealing.

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4. Points: Often you can pay up-front for points that will reduce your interest rate. Though this increases your initial costs, if you plan on staying in the house for the life of the loan, it may be a good investment that will save you money in the long run.

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5. Loan Term: Many mortgages last for 30 years, but you’ll also find loans for 10, 15, and 20 years. A lower duration means higher monthly payments, but you’ll save a great deal in interest costs over the life of the loan.

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6. Closing Costs: All loans have closing costs, which are a variety of fees and expenses that are involved in closing the loan. On average, typical closing costs can run from 2 to
5% of the total purchase price and include things like title fees, appraisal fees, inspection fees, and the like. If you’re not sure how much you can afford, we recommend starting with a mortgage calculator, which will let you plug in things like home cost and interest rate, and see how much you’ll pay month to month and over the life of the loan. Not only will this give you a good idea of what your costs will be, it can also help you compare mortgages to decide what type is best for you, and whether it’s worth buying points to lower your interest rate. Once you’ve run the numbers through a calculator to decide what kind of loan you’re looking for, it’s time to shop around with different lenders to see who’s willing to offer the best deal. Once you’ve narrowed your options and have selected a lender, it’s time to submit an application. Upon receipt of your application request, the lender will provide you with a good faith estimate (or GFE) that will give you an accounting of all of your costs to give an estimate of the total cost of the loan. Though the final costs may be different, a GFE will give you a ballpark figure that you’re likely to pay for the mortgage.

About six months before you hope to move, check the dates on your current lease. You’ll want to time your move to avoid overlapping your last rent payments with your first mortgage payments. Your first mortgage payment is generally due about two months after closing. If you can close on your new home the month before your lease ends, you’ll have that last month of your lease for moving before you have to start making mortgage payments on the new place. 

3 months: When your ideal moving date is 90 days away, it’s time to prequalify your loan with the lender you’ve chosen to finance with. Provide the basics on your income, debt, and credit history to receive an early, nonbinding estimate of how much you’re likely to be approved to spend.

3 months: Line up a real estate agent and start hunting for the home of your dreams. Internet home listing sites are fun to shop with, but they can’t keep up with the real thing. Getting an expert on your side costs buyers like you nothing.

2 months: Gather the documentation you’ll need for your mortgage application. You can formally apply now so that your pre-approval is based on validated documents rather than just stated information on your application. This is viewed by most sellers as a stronger bid factor which will enable the seller to have more confidence in your offer in case there are multiple bids.

1-2 months: t’s go time! Shop for a home. Make an offer. Your real estate agent will help you negotiate through this process.

1 month: Don’t risk your savings on a home that could be hiding potential problems. Now is the time to pay for a professional home inspection. Save for this expense as part of your closing cost savings. 1 month: Finalize the purchase agreement and submit your mortgage application.

1 month: Get a home appraisal from your mortgage lender. Save for this expense, too, as part of your expected closing costs.

1 month: Hurry up and wait. Plenty goes on behind the scenes. Your real estate agent will lead you through the maze of underwriting, home title research, termite inspection reports and more. Closing day: Once you’ve cleared all the obstacles, it’s time for closing day. You’ll sign a massive sheaf of documents and receive the keys to your new home. Congratulations—you’ve bought a home! 

updated February 9, 2020 by Kenny Zhu

Title insurance is a type of insurance that covers potential damages from errors in the ownership records of your home or property. In most cases, you purchase title insurance when you get a mortgage. Title insurance policy covers either a homeowner or a mortgage lender, but you'll usually need to pay for both types as part of your closing costs.

​What is Title Insurance?

A title insurance policy pays the policyholder if there's anything wrong with the title for a property. In US states, the recorder of deeds doesn't guarantee perfect accuracy in its record-keeping. This means that it's possible for someone with an older document to press a claim on your newly purchased home, if there is evidence of past fraud or forgery. Title insurance pays for the cost of "perfecting" your title rights or provides compensation if you lose the property altogether.

Every title insurance policy covers either a homeowner or the lender that financed the mortgage for the property. Lenders require you to pay for lender's title insurance as part of your mortgage closing costs. Homeowner's title insurance is mostly optional, and is paid for by the seller or the buyer of the property. Title insurance coverage begins when you buy the policy and extends indefinitely into the past, covering both known and unknown inconsistencies in the documented history of ownership.

​Why Do You Need Title Insurance?

Purchasing lender's title insurance is a mandatory part of the mortgage process. However, it's often a good idea to buy title coverage for yourself as the homeowner. Title insurance can compensate you for damages or legal costs in a variety of situations.

​Title Insurance Protects You From…

• Previously unreported liens and easements on the property

• Forged transfers of ownership rights in the property

• Unintentional errors in recording or filing of documents

• Any other title defects that existed prior to the start of your policy
  
  

While the actual number of claims paid out to title insurance purchasers is relatively small, the open-ended nature of land recording in the US means that there are several scenarios—however unlikely—where title insurance can save you thousands of dollars in legal fees. The possibility of defective title goes up if you're purchasing a foreclosed or otherwise troubled property. In the most extreme situation, title insurance could end up compensating you for the forfeiture of the whole property.

How Much Does Title Insurance Cost?

In most situations, mandatory lender's title insurance costs fall between $500 and $1,500, based on the state you're located in and how much money you're borrowing in your home loan. Location is the biggest factor in the cost of both lender and optional homeowner policies. Every state holds title insurers to a different standard. Some jurisdictions require more work from the insurer to verify the history of your title, raising the cost of providing the title policy.

​While optional, homeowner's title insurance is generally more expensive than lender policies. You can pay anywhere from $700 to $2,000 on title coverage for yourself. Larger loan amounts, smaller down payments and lower credit scores can all raise the cost of title insurance. While you can save a considerable amount by skipping homeowner's title insurance, the policy never expires and can end up protecting you from issues that arise long after you sell the house and move on.

​Finally, you may find it possible to negotiate with your seller and lender on the sharing of title insurance costs. While this is a matter of custom that varies by state, some jurisdictions expect the seller to foot the bill for a homeowner's title insurance policy that covers the buyer. In foreclosure sales, the lender holds the rights to the property and may be willing to cover the usual cost for your homeowner's title insurance. However, you may want to order a separate title search on a foreclosed property to verify that you're buying it free and clear of any competing claims.

​Can You Choose Title Insurance?

You can choose your own title insurance company for both lender's and homeowner's title insurance, although few people actually do so. If you're considering purchasing a homeowner's policy for yourself, it makes sense to do your own shopping. Title insurers can often provide discounts if you purchase both sets of policies at the same time. There are four national title companies to choose from, along with dozens of smaller local insurers.

​Major National Title Insurance Companies

• Fidelity National

• First American

• Old Republic

• Stewart Title
  
  

You can obtain quotes online from most of these major insurers by providing your mortgage information. Traditionally, title insurance was chosen by professionals involved in the mortgage process, such as realtors, attorneys and lenders. When buying a condo or house in New Jersey, for example, either the seller or buyer's attorney will have recommendations for title companies. However, the growth of Internet use has moved the title insurance industry towards a direct-to-consumer approach in recent years, making it easier for you to explore prices for yourself.

Purchasing a home can be a complicated process, especially for first-time buyers who are just learning the ropes. But one thing that doesn’t have to be overly complicated is a VA (Veteran's Administration) mortgage loan. Designed for veterans, these mortgages can be a great deal—especially for buyers who are struggling to save for a down payment.

VA mortgage loans have certain eligibility criteria that must be met along with program specific forms to complete prior to applying for a VA mortgage. So that you can confidently prepare yourself for the process ahead and decide if a VA mortgage is right for you, click here to walk through several of the most commonly asked questions and facts you might not know about the program.