Congratulations! You’re just a few steps away from getting the keys to your new home in Nevada. But before you can officially get the keys, one of the last steps is to pay closing costs.
Closing costs are the fees and expenses associated with finalizing a real estate transaction and transferring ownership of a property from the seller to the buyer. If you’re feeling unprepared or overwhelmed, don’t worry. To help you budget for closing costs, this Redfin article will cover how much closing costs are in Nevada, who pays for them, and which costs you can expect to pay as a buyer and as a seller.
How much are closing costs on average in Nevada?
In addition to the down payment, homebuyers will also need to pay closing costs before securing the keys to their new home. As a general rule of thumb, you can expect closing costs in Nevada to add up between 2%-5% of the purchase price. However, keep in mind that closing cost amounts vary depending on many factors – such as the purchase price of the home, the type of loan, and any adjustments negotiated with the seller.
For example, if you’re buying a home in Henderson, which has a median sale price of $495,000, closing costs could range anywhere from $9,900 to $24,750. Or, let’s say that you’re buying a home in Las Vegas, which has a median sale price of $440,000. Closing costs for a home here could range from $8,800 and $22,000.
Who pays closing costs in Nevada?
So, who pays for closing costs in Nevada? In most transactions, both the buyer and seller will pay closing costs. But, each party’s closing costs amount will vary depending on what they are required to pay. Keep in mind that it’s common for the buyer to pay closing costs out of pocket, while the seller’s closing costs are typically deducted from the home sale proceeds.
Buyer closing costs in Nevada
Closing costs in Nevada for buyers usually range from 2%-5%. In most cases, you’ll pay earnest money, typically 1% to 3% of the home price, upon reaching mutual acceptance in your home purchase. This deposit is subtracted from your closing costs, reducing the total amount due at closing. Let’s break down some of the common closing costs covered by the buyer:
Appraisal fee: Home appraisals, which typically range from $300 to $500, are usually paid for separately at the time of the service. However, if not, you’ll need to pay for this at closing.
Inspection fee: Although not required, a home inspection is highly recommended. Home inspections generally range from $300 to $500 in cost and are usually paid at the time of service. However, if not, it will need to be paid at closing.
Loan origination fee: Most lenders charge a fee for creating your loan. Be sure to check with your lender what this fee covers and if it can be waived or negotiated.
Loan processing fee: Lenders may also charge a loan processing fee, covering underwriting and related services. Similar to the origination fee, check with your lender to understand its purpose and possible waivers.
Loan discount points: If you buy discount points to lower your interest rate, you’ll pay a one-time fee at closing. These points can lower your rate by 0.25% to 0.5%, but consider your long-term homeownership plans before paying for a reduced rate.
Private mortgage insurance (PMI): Required for down payments under 20%, PMI might involve an upfront fee at closing, depending on the loan type. It’s usually part of your monthly payment, but some loans offer the option to pay it as a one-time fee.
Title insurance: Title insurance is a one-time fee paid as part of closing costs. Buyers typically cover both lender and owner title insurance policies.
Homeowners insurance: In Nevada, your annual homeowner’s insurance premium may be part of your closing costs.
Homeowners Association dues: If your property is part of a homeowners association, you’ll likely pay one month’s dues upfront at closing. These fees vary and contribute to maintenance and operational costs.
Property taxes: As part of closing costs in Nevada, you may be required to prepay a portion of your property taxes at closing.
Seller closing costs in Nevada
How much closing costs are in Nevada for sellers will vary between each transaction. Here are some of the common fees and costs covered by sellers:
Real estate agent commission fees: These fees can be a significant cost for sellers. Commission fees may vary and are subject to negotiation. Sellers should discuss their options with their agent.
Homeowners Association fees: If the property is part of an HOA, the seller may need to pay a variety of fees. These can include HOA transfer fees, outstanding dues, and possibly a fee for obtaining HOA documents required by the buyer. The exact fees will depend on the HOA’s rules and regulations.
Property taxes: Sellers are responsible for any property taxes that have accrued but not yet been paid up to the closing date. These unpaid property taxes are typically prorated for the months that you owned the property.
Title insurance: Owner’s title insurance is another common closing cost in Nevada paid for by the seller.
Transfer taxes: In Nevada, there is a state levied tax on the transfer of ownership of a property. Sellers can expect to pay a one-time transfer tax as part of closing costs. There may also be additional taxes levied by local governments, such as counties and cities.
Median home sale price data from the Redfin Data Center during July 2024.
A specialty? Luxury apartment complexes in Los Angeles neighborhoods such as Palms and Silver Lake filled with mostly market rate units, but with a handful of income-restricted affordable ones as well.
It can be a good business, but lately less so.
“We have pulled back,” said Kahan, the president of California Landmark Group. “The metrics don’t work.”
Across California and the nation, developers moved to start fewer homes in 2023, a decline some experts say could eventually send home prices and rents even higher as supply shortages worsen.
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Developers cite several reasons for delaying new projects. There’s high labor and material costs, as well as new local regulations that together make it harder to turn a profit.
Perhaps the biggest factor — and one hitting across the country — is the high cost of borrowing. Rising interest rates not only make it more expensive for Americans to buy a home, but they add additional costs for developers who must shell out more money to build and manage their projects.
As a result, fewer projects make financial sense to build and fewer homes are built.
“More than anything it is debt costs,” said Ryan Patap, an analyst for real estate research firm CoStar.
In all, preliminary data from the US. Census Bureau show building permits for new homes nationwide fell 12% in 2023 from the prior year and 7% in California. Drops were recorded in both single-family homes — most of which tend to be for sale — as well as multifamily homes — which are chiefly rentals.
Dan Dunmoyer, president of the California Building Industry Assn., said one major reason for the decline is that many for-sale home builders foresaw “a massive downturn” and stopped buying lots to develop when mortgage rates soared in 2022.
Then a funny thing happened. Demand for their product didn’t crater as much as expected, in large part because existing homeowners didn’t want to sell and rid themselves of ultra-low mortgage rates.
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“Builders kind of woke up and realized ‘Oh, it’s just us [selling homes],‘” Dunmoyer said. “But we don’t turn on a dime.”
As for-sale builders restart their engines to take advantage of a shortage of listings, there are signs of improvement. During the first two months of this year, builders in California pulled 35% more permits for single-family homes than during the same period a year earlier, according to census data.
Permits for multifamily continued to decline — dropping 33%.
The diverging paths are probably due to several factors, said Rick Palacios Jr., director of research for John Burns Research and Consulting.
On a whole, single-family home builders have access to a wider source of debt that isn’t as vulnerable to rising interest rates. In the single-family market, the supply shortage has also worsened and home prices are climbing.
Meanwhile, rents in many places — including Los Angeles — have dropped slightly as vacancies have risen, in part because apartment construction has been relatively robust in recent years.
“Single-family solid, multifamily weak is a pretty consistent theme across most of the country,” Palacios said. “You’re hard pressed to find a market where developers and investors are gung ho on apartments.”
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In the city of Los Angeles, developers must contend with another factor — Measure ULA.
The citywide property transfer tax took effect last year to fund affordable housing and has drawn the ire of the real estate industry.
Though it’s known as the “mansion tax,” except for rare exceptions it applies to all properties sold for more than $5 million, no matter if they are gas stations, strip malls, apartment buildings or actual mansions. Under the measure, a seller is charged 4% of the sales price for properties sold above $5 million and below $10 million.
At $10 million and above, the tax is 5.5%.
Apartment developers and real estate brokers said additional costs from ULA make it even harder to earn a reasonable profit in what can be a risky business.
That’s because when building apartments, developers often sell their finished product, which would probably trigger the ULA tax for any building over 15 units, according to Greg Harris, a real estate broker with Marcus and Millichap. Even developers who hold onto their properties typically need to take out a mortgage on the finished building — and Harris said lenders are willing to give less because they too would need to pay the tax if they foreclose and sell the property.
“ULA is like the last nail in the coffin,” said Robert Green, a Los Angeles developer. “It couldn’t have come at a worse time.”
Many apartment projects got their start under different economic circumstances and have opened in recent years or will soon. That supply should help keep rents down for a while, but not forever, said Richard Green, executive director of the USC Lusk Center for Real Estate.
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In two or three years, as fewer apartments are finished “we will see rent start to go up again,” he said.
That would be a hit for Californians struggling to find housing in an expensive state where thousands sleep on the streets.
Economic cycles, of course, ebb and flow and construction may rebound.
The Federal Reserve plans to cut interest rates later this year, which may help more projects make sense financially, as could rising rents.
Land sellers could also drop their asking prices to adjust for rising developer costs, including ULA in Los Angeles.
Normally, real estate analyst Patap said he’d expect apartment construction to rebound as land costs adjust downward. But he noted developers say they are also cautious about building in L.A. because of a broader political shift in the city that’s more supportive of restrictions on landlords and more supportive of protections for tenants.
In the city of Los Angeles, multifamily permits dropped 24% in 2023 compared with 19% in Los Angeles County, census data show. (Data from the Construction Industry Research Board show even larger drops: 49% in the city and 39% in the county.)
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Laurie Lustig-Bower, a commercial real estate broker with CBRE, said some L.A. landowners have reduced their prices to sell, but “if they don’t have a gun to their head” they are waiting until developers can pay more.
In recent years, state lawmakers have taken action to make it easier to build housing, in part by eroding local control over land use decisions.
Los Angeles Mayor Karen Bass has also fast-tracked 100% affordable buildings under her Executive Directive 1, while the city recently exempted smaller projects from some storm water capture requirements.
Mott Smith, chairman of the Council of Infill Builders, said more must be done to increase the number of new homes in Los Angeles and cited the storm water decision as the kind of steps government should take.
“The city has no influence over interest rates … [but] what it controls is the process to get a project approved,” Smith said. “There are so many opportunities.”
For now, developers say it’s tough to find opportunities.
Kahan said his company runs the numbers on potential land purchases constantly and at least once a week finds it doesn’t make sense to buy and build.
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He expects to purchase some land in Southern California by year’s end, though mostly outside of the city of Los Angeles where Kahan said he’s increasingly looking because of costs from ULA, which unlike current interest rates aren’t expected to change.
So far, Kahan said he’s yet to find a deal that will work — within or outside city borders.
“Fee cures and the costs associated with them – entirely preventable expenses – are contributing to the already ballooning cost to originate a mortgage,” said Tim Bowler, president of ICE Mortgage Technology. After reviewing nearly 90,000 mortgages, ICE found lenders wasted an average of $1,225 per loan on fee cure-related expenses to correct disclosure errors. … [Read more…]
A mortgage transfer is when another person or an entity takes over your existing mortgage.
Most mortgages are not transferable, but lenders may approve a transfer in a few situations.
In most circumstances, a mortgage can’t be transferred from one borrower to another. That’s because most lenders and loan types don’t allow another borrower to take over payment of an existing mortgage.
In some cases, though, a mortgage transfer is necessary and allowed, such as in the event of a death, divorce or separation, or when a living trust is involved.
What is a mortgage transfer?
A transfer of a mortgage is when a borrower reassigns an existing home loan to another person or entity.
“In essence, this transfers all responsibilities associated with the mortgage and lien on the property to somebody new,” says Rene Segura, head of consumer lending for FBX, the banking division of Informa Financial Intelligence, based in Dallas.
This transfer, or assignment, is usually only allowed when the mortgage is assumable, says Rajeh Saadeh, a Somerville, New Jersey-based real estate attorney. When transferring an assumable mortgage, the new borrower agrees to make all future payments at the original interest rate. The transfer typically severs any legal obligations the original borrower has to the loan.
How a transfer of mortgage works
When you transfer a mortgage, another person assumes the financial responsibility of repaying the outstanding loan balance, under the same terms and conditions. The monthly payment, loan length and interest rate will remain the same once the mortgage is transferred to the new borrower. After the successful transfer of a mortgage, the original borrower is usually relieved of any financial obligations for repaying the loan.
Transferring a mortgage has benefits for both the original borrower and the new borrower. For example, transferring a mortgage can help the original borrower avoid foreclosure if they’re unable to continue paying their loan. For the new borrower, assuming an existing mortgage can potentially help them get a better interest rate than what’s offered in the current market and avoid the closing costs required with a new mortgage.
Can I transfer my mortgage to another person?
The short answer is yes, you can transfer your mortgage to another person, but only under certain circumstances. To find out if your mortgage is transferable, assumable or assignable, contact your lender and ask.
“Most lenders would prefer not to do a loan transfer, as it doesn’t benefit them in any way unless the buyer is at risk of being in default,” says Dustin Singer, a real estate agent and an investor in Pittsburgh.
Make no mistake: Most mortgages are not transferable from one borrower to another. That’s true of conventional loans, which are not government-backed (meaning they’re not an FHA, VA or USDA loan), as well as conforming loans that meet funding criteria for Fannie Mae and Freddie Mac.
“These types of loans tend to use a due-on-sale clause, which requires a loan to be repaid in full or conveyance of the full interest in a property to allow the mortgage transfer,” says Segura. “In other words, the loan must be fully repaid, and a new mortgage would need to be executed to achieve a transfer.”
Loans that are usually assumable, meaning you can transfer them in some cases, include:
FHA loans
VA loans
USDA loans
Keep in mind there are exceptions to this rule, so not all loans will be transferable.
“FHA loans are typically assumable but depend on the current state of the loan and the creditworthiness of the new borrower at the time of attempted transfer,” says Segura, adding that to complete the transfer, the new borrower would have to go through the application process and may need to have a property appraisal done, as well.
For VA loans, this same process applies, but only if the loan closed before March 1, 1988. VA loans closed after that date may require approval by the lender or loan servicer.
USDA loans may also be transferable pending lender approval.
Exceptions to the rule
Even if your mortgage has a due-on-sale clause and isn’t assumable, there are certain circumstances under which your lender may approve a transfer. These include:
Death of a spouse, joint tenant or relative
Transfers between family members, including the borrower’s spouse or children
Divorce or separation agreements in which an ex-spouse continues to live in the home
Living trust arrangements in which the borrower is a beneficiary
For these mortgage transfers to work, the new borrower needs to be added to the property’s deed, the deceased owner needs to be removed from the deed or a spouse relinquishing ownership must sign a quitclaim deed.
When a mortgage transfer makes sense
There are several situations when transferring a mortgage might make sense. Some of those scenarios include:
A family member has an ownership stake in the home: If an immediate family member has an ownership stake in the property, you might transfer the mortgage into their name.
A family member is better suited financially to take on the loan: Transferring a mortgage can be a good solution if you have a family member who is in a better financial position to repay the loan.
The original borrower has passed away: If the original mortgage borrower dies, it makes sense to transfer the loan to a relative or survivor who has the ability to pay it back.
“All of these scenarios are still on a case-by-case basis in which the lender will need to approve the transfer,” says Segura.
“Many people try to assume mortgages so they can take advantage of lower interest rates than what they would qualify for today,” says Than Merrill, founder of FortuneBuilders in San Diego.
How to transfer a mortgage
To learn how to transfer ownership of a house with a mortgage, you’ll need to talk to your lender and see if your mortgage qualifies for a transfer. Here’s how the process might look:
Contact your lender. Before doing anything else, reach out to your lender to check that your mortgage is transferable.
Consider legal representation. Transferring a mortgage can be complicated. If you’re nervous about doing it alone, you can hire an attorney to help you navigate the process.
Begin the transfer process. After confirming your eligibility, you can work with your lender to start the transfer. Depending on your loan and lender, this can include completing paperwork and verifying that you’re current on your payments. The lender will also assess the new borrower’s credit profile.
Complete the transfer. Mortgage transfers aren’t instant. Until yours is approved, don’t forget to keep making loan payments and comply with any follow-up instructions sent by your lender.
What are transfer taxes?
Some state and local governments impose a one-time real estate transfer tax that must be paid any time a property is transferred from one person to another. In many cases, the seller must cover transfer taxes, but this varies by jurisdiction. The amount of the tax also depends on where you live, but it’s usually either a flat rate or a percentage of your home’s sale price.
Alternatives to a mortgage transfer
Instead of transferring a mortgage, consider these alternatives:
Buying the home from the original borrower: The person who wishes to assume the loan applies for a new mortgage and buys the home from the previous borrower. However, this means dealing with new loan terms and interest rates.
Adding a second borrower: This option involves adding the new borrower to the loan. However, it won’t remove the original borrower, so they’ll remain liable for the debt.
Refinancing and adding a borrower: Refinancing your mortgage and adding a second borrower lets you adjust the loan’s terms and rate. It may be easier to add another borrower by refinancing. However, this also has the drawback of not freeing the original borrower from their liability for the loan.
Unofficial transfers: With this option, you can have the new borrower send payments to the original borrower, who then pays the loan. However, this is a bad idea because the initial borrower is liable for the debt and has little recourse if the new borrower stops paying. It may also break the terms of the mortgage, especially if the original borrower moves out.
FAQ
While most mortgages aren’t transferable, some lenders might make an exception for transfers between parents and children. You’ll need to speak with your lender to see if you’re eligible and understand the requirements.
For an official transfer, you’ll need to work with your lender to initiate and complete the process. There are also unofficial transfers, where the original borrower continues paying the loan using funds from the new borrower (and neither party notifies the lender). This isn’t recommended because it has legal and financial risks.
A bank might transfer a mortgage for several reasons, including death and divorce. Living trust arrangements can also trigger a mortgage transfer.
Bottom line
Transferring a mortgage can simplify things: The new borrower wouldn’t have to apply for a new loan, pay for closing costs or possibly risk paying higher interest rates. However, many kinds of mortgages aren’t transferable, and if yours is, you’ll have to prepare for a lot of paperwork to make it official.
“The mortgage transfer will require a lot of documentation, with several new guidelines and criteria on the loan,” says Segura. “Read all documents thoroughly for any potential changes on the mortgage rights.”
Also, keep in mind that a mortgage transfer doesn’t change the debt obligation on the loan; the new borrower still needs to pay off the same outstanding balance.
If in doubt, consider discussing this option with a real estate attorney and skilled financial professional before proceeding.
Buying a home is an exciting milestone, but it comes with its fair share of financial responsibilities, including the often-misunderstood closing costs. These costs are a vital part of your home purchase budget and can significantly impact your financial planning as a new homeowner.
Far from being just a trivial detail, closing costs encompass a range of fees and charges that, when understood correctly, can help you make more informed decisions and potentially save money in your home-buying journey.
Here’s everything you need to know about mortgage closing costs to avoid any last-minute surprises.
Who Pays the Closing Costs: Buyer or Seller?
When it comes to closing costs in a home purchase, the question of who pays what is often a topic of negotiation and varies by transaction. Generally, both buyers and sellers have their own set of fees to handle, but the exact distribution can differ.
Your mortgage lender is required to provide you with an estimated breakdown at multiple points in the loan process. The loan estimate outlines the estimated closing costs and lists out all the different fees, as well as who is responsible for paying them.
Buyer’s Responsibility
Typically, the buyer shoulders a significant portion of the closing costs, which can include:
Loan-related fees (such as application and origination fees)
Appraisal and inspection fees
Initial escrow deposit for property taxes and mortgage insurance
Title insurance and search fees
Seller’s Contribution
Sellers commonly pay for:
Real estate agent commissions
Transfer taxes and recording fees
Any homeowner association transfer fees
Room for Negotiation
It’s important to note that these are not hard and fast rules. In many cases, closing costs are a point of negotiation in the sale agreement. For example, in a buyer’s market, a seller might agree to cover a larger portion of the closing costs to attract buyers. Conversely, in a seller’s market, the buyer might take on a larger share to make their offer more appealing.
Case Example
Imagine you’re buying a home priced at $300,000. The closing costs, amounting to approximately 3% of the purchase price, would be around $9,000. As a buyer, you might agree to pay $6,000 of this, covering most of the loan-related fees and escrow deposits. The seller, in turn, might handle the remaining $3,000, covering their portion of fees like the agent’s commission and transfer taxes.
Comprehensive List of Fees Associated with Mortgage Closing Costs
Mortgage closing costs can be broken down into a few different categories: lender fees, real estate fees, and mortgage insurance fees.
Lender Fees
These fees may vary depending on the lender you choose. Here’s a basic rundown of each closing cost to give you an idea of what you can expect.
Application fee: Covers processing your mortgage loan application and obtaining your credit report.
Attorney fee: In some states, an attorney must review the mortgage paperwork; fees vary and can be hourly or a flat rate.
Broker fee: If using a mortgage broker, they typically charge a commission, usually between 1% and 2% of the home’s purchase price.
Origination fee: The origination fee compensates the lender for administrative tasks and is typically around 1% of the loan amount.
Discount points: Paying points upfront can lower your interest rate; each point equals one percent of your loan amount.
Prepaid interest: Covers the interest that accrues between the closing date and the first mortgage payment.
Recording fee: Charged by local governments for recording the mortgage documents; it covers the administrative costs of maintaining public records.
Underwriting fee: Charged for the underwriter’s services in evaluating and preparing your loan; includes costs like due diligence and legal fees.
Real Estate Fees
Real estate fees are related to costs surrounding the property itself. Some are one-time fees, while others are recurring.
Appraisal fee: Necessary to assess the market value of the home. Costs vary, but typically around $500 to $600, payable before the appraisal or at closing.
Property tax: Generally an annual or biannual payment. Most lenders require at least two months’ worth pre-paid into an escrow account at closing.
Homeowners’ insurance policy: An annual premium required for a home loan. The first year’s premium is often paid at closing, with subsequent payments included in your mortgage.
Title search and insurance: Ensures the property is lien-free. Lender’s title insurance protects the lender, while owner’s title insurance safeguards the buyer.
Transfer tax: Imposed by governments when a property is sold, usually a percentage of the sale price.
HOA fees: For properties in a homeowners association, this may include a transfer fee and potentially the first year’s annual assessment.
Mortgage Insurance Fees
When you pay less than 20% of your home purchase price as part of your down payment, you’re usually required to pay mortgage insurance. Your private mortgage insurance (PMI) premium is typically assessed as a monthly fee within your mortgage payment. However, you may also have some costs at closing.
Upfront mortgage insurance fee: Depending on your loan type and lender, you may have to pay an additional application fee for a loan with mortgage insurance. Additionally, some loans require that you pay a one-time fee at the time of closing on top of your annual fee throughout the mortgage.
Government-backed loan fees: If your loan is from the FHA, USDA, or VA, then you may have extra mortgage insurance fees if your down payment is under 20%. FHA loans require an upfront mortgage insurance premium (MIP) of 1.75% and a monthly fee. The VA and USDA don’t charge mortgage insurance, but instead have guarantee fees. VA fees fall between 1.25% and 3.3% while USDA fees are a flat 2%.
Understanding How Closing Costs Are Calculated
That list may seem huge and overwhelming. However, before making an offer on a house, you can estimate your closing costs using some shortcuts. Average closing costs are usually about 2% – 6% of the loan amount.
Let’s look at that in real numbers.
Say you buy a home for $200,000. You can realistically expect your closing costs (not including your down payment) to extend anywhere between $4,000 and $10,000. That’s a pretty big range, so use that as a starting point when you begin to compare loan offers.
But don’t wait until you’ve fallen in love with a house to financially plan for closing costs.
Instead, use an online closing costs calculator early in the process to get a more specific estimate. You will want to use real information like average property taxes in your area and the costs associated with your type of loan.
A good mortgage lender can walk you through the variables, including how different loan types affect your closing costs.
Strategies for Reducing Closing Costs: Negotiation Tactics
Negotiating closing costs can be an effective way to reduce the financial burden of buying a home. While some fees are fixed, others offer room for negotiation. Here are strategies and insights to help you lower these costs:
Understand What Can Be Negotiated
Identify which fees are negotiable. These often include certain lender fees like the origination fee, broker fees, and some third-party charges. Knowing what can be adjusted is the first step in negotiation.
Compare and Shop Around
Before settling with one lender, shop around. Get Good Faith Estimates from multiple lenders and compare their closing costs. This can give you leverage in negotiations, as lenders are often willing to offer competitive pricing to win your business.
Ask the Seller to Contribute
In some real estate markets, it’s common for buyers to ask sellers to cover a portion of the closing costs. This is particularly feasible in buyer’s markets, where sellers are motivated to make the sale.
Look for Lender Credits
Some lenders offer credits in exchange for a slightly higher interest rate on your loan. These credits can be used to offset closing costs. While this increases your long-term interest cost, it can significantly reduce upfront expenses.
Negotiate with Service Providers
For services like home inspections and title searches, you have the option to choose your provider. Shop around and negotiate with these providers for better rates.
Review the Closing Disclosure Form
Before closing, you’ll receive a Closing Disclosure form listing all the fees. Review it carefully and question any fees that seem off or weren’t previously disclosed. Sometimes, errors can be corrected, leading to lower costs.
Time Your Closing
By scheduling your closing towards the end of the month, you can reduce the amount of prepaid interest you’ll need to pay.
Seek Legal or Financial Advice
Consider consulting with a real estate attorney or a financial advisor. They can provide valuable advice on which costs can be cut and how to negotiate effectively.
Options for Financing Your Closing Costs
In some cases, you can roll your closing costs into the mortgage, but you have to meet some basic requirements. First, it depends on your type of loan, since not all loans allow you to do this. Most government-backed loans, like FHA and USDA loans, do offer the possibility to add them into your home loan.
What’s the downside to this idea?
A higher loan amount means a higher monthly mortgage payment and a larger amount of interest paid over the life of your mortgage. Furthermore, your new home needs to appraise for the higher amount you want to finance. Plus, your debt-to-income ratio needs to be able to support that larger payment to qualify for such a loan.
If you’re getting a loan that doesn’t allow for closing costs to be rolled into the mortgage, you can still get around it. However, you must meet those criteria we just talked about.
Simply ask the seller (through your real estate agent) to pay for closing costs in exchange for paying the extra amount as part of the purchase price. Here’s an example.
If your $200,000 offer is accepted, but closing costs are $5,000, ask the seller to contribute $5,000 and change your offer to $205,000. At the end of the day, the seller still walks away with the same amount of money.
Again, this strategy is contingent upon the numbers working for you, your financial situation, and your mortgage application.
Finalizing Payment: Methods to Cover Your Closing Costs
When you finally get to closing day, it’s almost time to relax and move into your new home. But first, don’t forget to set up a way to pay closing costs.
You can ask your lender or settlement company for the preferred payment method. However, in most cases, you can either get a cashier’s check from your bank or set up a wire transfer. There’s usually a minor fee associated with each one. It’s a quick and easy process, but it shouldn’t be forgotten before you get to closing.
Conclusion
Closing costs are a crucial aspect of buying a home. Being well-informed and prepared for these expenses can make a significant difference in your financial planning. Remember, while some fees are fixed, others offer room for negotiation, and shopping around can lead to potential savings.
By factoring in these costs from the start, you can ensure a smoother, more predictable home-buying experience. Buying a house is a major step – financially and personally. Approach it with the right knowledge, and you’ll be set to make this important decision with confidence and peace of mind.
Frequently Asked Questions
What is an escrow account, and how does it relate to closing costs?
An escrow account is a third-party account where funds are held during the process of a transaction, like buying a home. Regarding closing costs, part of these costs often includes initial deposits into an escrow account for future property taxes and homeowners’ insurance. This ensures that there is enough money set aside to cover these recurring expenses.
Can closing costs be included in the mortgage loan?
In some cases, closing costs can be rolled into the mortgage loan. This is more common with certain types of loans, like FHA loans. However, including closing costs in the loan increases the total loan amount and, consequently, your monthly mortgage payments and the total interest paid over the life of the loan.
Are there any tax benefits related to closing costs?
Yes, certain closing costs can have tax benefits. For example, points paid to lower your interest rate may be deductible in the year you buy your home. Always consult a tax professional to understand how your closing costs might affect your taxes.
How can first-time homebuyers prepare for closing costs?
First-time homebuyers should start saving early for closing costs, which typically range from 2% to 6% of the home purchase price. It’s also helpful to research and understand the different types of fees involved in closing costs, and consider attending homebuyer education courses for more detailed information.
What happens if I can’t afford closing costs?
If you find that you can’t afford closing costs, there are a few options. You can negotiate with the seller to pay some or all of the costs, look for lender credits, or explore programs available for first-time buyers or low-income buyers that offer assistance with closing costs.
Southern California’s luxury real estate market never sleeps. But this past year, it collectively caught its breath.
Luxury sales slowed down in 2023 — a combination of soaring interest rates, a newly introduced “mansion tax” and an inevitable drop-off from a pandemic market when megamansions flipped like hotcakes.
In 2022, there were 17 home sales above $50 million and 48 over $30 million in L.A. County, according to the Multiple Listing Service. In 2023, there were only five sales over $50 million and 23 over $30 million.
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But even in a down year, there were still plenty of headlines. Jay-Z and Beyoncé set the all-time price record in the state of California, while other celebrities sold homes and left L.A. just in time to avoid paying taxes under Measure ULA.
Here are the top sales of the year.
$200 million
Bought for $200 million, the 40,000-square-foot mansion overlooks the ocean in the affluent enclave of Paradise Cove.
(Google Earth)
History was made in May when Jay-Z and Beyoncé shattered California’s price record, paying $200 million for a concrete compound in Malibu.
The L-shaped house, which topped the previous record of $177 million, looks more like an airplane hangar or supervillain’s lair than a home. It was built by Tadao Ando, a decorated Japanese architect who also designed a home for Kanye West a few miles down the coast. Ando brought in 7,645 cubic yards of concrete to erect the 40,000-square-foot home.
It never officially hit the market, so photos are scarce. The property is perched above Malibu’s Paradise Cove and features concrete hallways and walls of glass that open to a swimming pool and lawn overlooking the ocean.
$60.85 million
Another power couple — Jennifer Lopez and Ben Affleck — claimed the second-highest home purchase of the year when they shelled out $60.85 million for a five-acre spread in Beverly Crest. High interest rates weren’t a problem; they didn’t need a 30-year-fixed. The pair paid in cash.
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The deal marked the end of a year-long house hunt for Lopez and Affleck, and the house boasts an array of amenities that few other mega-mansions can match. Across 38,000 square feet are 12 bedrooms, 24 bathrooms, 15 fireplaces, a movie theater, wine cellar, nail salon and sauna, as well as a 5,000-square-foot sports facility with a boxing ring and pickleball court.
The $60.85-million sale actually came at a discount; the home originally hit the market with a gargantuan price tag of $135 million.
$55 million
Built in 2014, the European-inspired mansion comes with 12 bedrooms, 20 bathrooms, a skate park, movie theater and grotto.
(Anthony Barcelo)
Some scratched their heads when Mark Wahlberg unloaded his Beverly Park mega-mansion for $55 million in February. The movie star spent years designing the French-inspired palace, and he originally asked $87.5 million when he first listed it in 2022.
But Wahlberg was a motivated seller. He moved to Nevada last year, and by selling the home in February, he avoided Measure ULA, a transfer tax that took effect April 1 and would’ve charged a 5.5% tax on the sale. At $55 million, Wahlberg’s tax bill would’ve been more than $3 million.
The European-inspired showplace is truly one of a kind, featuring amenities such as a five-hole golf course, driving range, grotto-style swimming pool and skate park. Wahlberg, a native of Massachusetts, also added a Boston Celtics-themed basketball court during his stay.
$52.056 million
Malibu’s second entry on this list comes via attorney Stuart Liner and his wife, Stephanie Hershey Liner, who sold their beach house on Point Dume for just over $52 million.
The Liners have made a fortune flipping houses over the years, including doubling their money on a house they bought from actor Danny DeVito. They scored a hefty profit here as well; records show they paid $21.758 million for the oceanfront home in 2020 before extensively remodeling the place.
The 6,000-square-foot house comes with a swimming pool and tennis court. It sold to Tom van Loben Sels, a partner at Bay Area tax firm Apercen Partners.
$52 million
Built in 1998, Villa Firenze combines three lots across nearly 10 acres and centers on an Italian-inspired mansion.
(Hilton & Hyland)
For years, Villa Firenze was a cautionary tale, an extravagant reminder that while fortunes can be won in Southern California’s lucrative real estate market, you have to be strategic in how you sell to truly cash in.
Hungarian billionaire Steven Udvar-Hazy was not. The airplane mogul built the Italian-inspired mansion in 1998 and listed it for $165 million in 2017, which at the time was one of the most ambitious asking prices in California history.
Clearly overpriced, the house sat on the market for years until it was auctioned off for $51 million in 2021 to biotech entrepreneur Roy Eddleman, who, for some reason, tried the same thing as Udvar-Hazy.
Eddleman quickly attempted to flip the house for a massive profit, putting it back onto the market for $120 million just a year after he bought it. Unsurprisingly, there were no takers, and he died before it sold.
His estate slashed the price on the luxurious villa, which features 40-foot palm trees, 20-foot ceilings and a two-story library complete with a secret passageway that leads to a bedroom and bar.
After a year of price cuts, it finally sold in February for $52 million, just $1 million more than Eddleman paid for it at auction two years prior.
An L.A. County judge dismissed a lawsuit challenging L.A.’s “mansion tax” on Tuesday, marking the end of a months-long legal challenge from the luxury real estate community that looked to declare the measure unconstitutional.
The transfer tax known as Measure ULA was passed in November and took effect April 1, bringing a 4% charge on all residential and commercial real estate sales in the city above $5 million and a 5.5% charge on sales above $10 million, pumping millions into housing and homelessness-prevention efforts.
Los Angeles County Superior Court Judge Barbara Scheper issued a tentative ruling dismissing the challenge on Monday after hearing arguments from both sides, and she officially dismissed the lawsuit on Tuesday, according to court documents.
The ruling is a big win for housing activists, who say that L.A. desperately needs the money raised by the tax.
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“This is a great day for Los Angeles,” said Joe Donlin, who serves as director of the United to House LA coalition, which brought the measure onto the ballot in November. “The judge’s ruling confirms what we knew all along: ULA is the law of the land and it’s the will of the people. And it reminds us of the power of the people to shape our city’s future for the good.”
Donlin said he was surprised the ruling came out so soon.
“Before the hearing, we thought it might take weeks or months, but this was a positive sign that the judge didn’t feel compelled by the plaintiff’s arguments,” he said.
Advocates for Measure ULA gather outside Stanley Mosk Courthouse in downtown L.A. on Monday. A judge on Tuesday dismissed a lawsuit challenging the measure.
(United to House LA)
Greg Bonett, senior staff attorney for the Public Counsel who worked to defend the measure, applauded the decision, calling it “a resounding victory for the power of the people to initiate transformative solutions to address our city’s housing and homelessness crises.”
The judge’s ruling is a blow for many in the luxury real estate community, who claim that the transfer tax has frozen the market and stifled development.
Keith Fromm, an attorney for Newcastle Courtyards, one of two groups challenging the measure, said he plans to appeal the decision.
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“The order contains numerous errors of law which the appellate courts will hopefully recognize and correct,” Fromm said. “The ruling is simply one step in a very long journey to justice.”
The legal battle — which was headed by two main groups: Newcastle and Howard Jarvis Taxpayers Assn. — became a national conversation, as other cities looked to L.A. to see how it would implement such a tax.
Other cities such as San Francisco, New York City and Culver City have implemented transfer taxes, but L.A.’s is unique in scope and scale, not just taxing home sales but all property sales above $5 million.
Voters approved the measure with a 57% majority in November, and the tax became a hot-button issue immediately after.
Advocates argue that the tax is a way for luxury property owners to contribute to solving L.A.’s housing crisis, while opponents say it discourages development and pushes owners out of L.A. and into cities that don’t have the tax, such as Beverly Hills, West Hollywood or Santa Monica.
“With Measure ULA, we are now going to lose billions of dollars every year in economic development and property tax revenue in order to raise less than $500 million through the tax,” said Jason Oppenheim, a real estate agent with the Oppenheim Group and star of Netflix’s “Selling Sunset.”
The luxury real estate market froze in the months after the measure took effect, as many luxury homeowners looked to find loopholes to avoid paying the tax. Many hired accountants to find workarounds, such as dividing their homes into three parcels and selling them separately to stay under the $5-million threshold at which the tax kicks in.
Many homeowners held off on selling their homes, hoping the lawsuit would overturn the tax. As a result, funds raised by the tax have fallen dramatically short of original projections since sales have slowed.
In November, proponents of the tax estimated it would raise roughly $900 million a year. In March, a report from the city administrative officer lowered that number to $672 million. Then in April, Mayor Karen Bass’s first budget proposal, a $13.1-billion plan, included only $150 million in projected revenue from Measure ULA.
The number was chosen out of caution, as the city wanted to funnel as much money as possible toward housing and homelessness issues but not so much that it wouldn’t be able to pay it back if the measure were ruled unconstitutional.
But with the court’s latest ruling, spending will likely increase.
On Wednesday, the L.A. City Council’s budget, finance and innovation Committee will meet to discuss the implementation process, and the ULA coalition will propose that $12 million be reallocated to short-term emergency assistance for renters.
In August, the City Council passed a $150-million spending plan for funds raised by Measure ULA. It was the first time funds were specifically allocated since the tax was passed in November, and the plan sent money to six programs: short-term emergency rental assistance, eviction defense, tenant outreach and education, direct cash assistance for low-income seniors and people with disabilities, tenant protections and affordable housing production.
A generation-skipping trust (GST) allows people to leave assets to grandchildren or other people at least 37.5 years younger. Passing assets from Generation 1 to Generation 3 avoids paying federal estate taxes twice on assets — once when passing to Generation 2 and again when passing to Generation 3.
Although GSTs may avoid estate tax, they aren’t totally tax-free. Assets passing through a generation-skipping trust may be subject to the generation-skipping transfer tax. This tax rate happens to equal the estate tax rate, which ranges from 18% to 40%
. However, the generation-skipping tax generally only applies to estates over $12.92 million in 2023 or $13.61 million in 2024. That number is set to fall to $5 million after 2025.
Price (one-time)
None
Price (one-time)
One-time fee of $159 per individual or $259 for couples.
Price (one-time)
$89 for Basic will plan, $99 for Comprehensive will plan, $249 for Estate Plan Bundle.
Price (annual)
$99 to $209 per year.
Price (annual)
$19 annual membership fee.
Price (annual)
None
Access to attorney support
No
Access to attorney support
No
Access to attorney support
Yes
Who are GSTs good for?
Generation-skipping trusts are best for higher net worth families that want to minimize taxes on their estate, says Diedre Braverman, managing attorney with Braverman Law Group in Boulder, Colorado. People who don’t have a will or estate plan may end up leaving their heirs with taxes that they could have avoided, she adds.
Pros and cons of GSTs
When considering if a GST works best for you, think of the following.
Advantages
When set up properly, a GST may save money in taxes that Generation 2 may have had to pay had they received the assets first. This allows people to leave assets to grandchildren, nieces, nephews, grandnieces, grandnephews, or a younger spouse without having a lot of it swallowed up by taxes, Braverman says.
Trusts may be able to shield assets from lawsuits, bankruptcy and divorce settlements.
Setting up a GST gets you thinking about your legacy. “It may get you into estate planning in general,” Braverman says, “which is a good thing for everybody.”
Disadvantages
Attorney fees associated with setting up a GST vary greatly across the country and can be hefty.
Money in the trust can only be withdrawn for living expenses. While those amounts can be generous, it still has to have some relationship correlated to the beneficiaries’ standard of living, Braverman says.
Trusts require a trustee, which is an ongoing expense.
The generation that gets skipped may have objections. “Generation 2 can typically get income from the trust, but they don’t have ownership in the trust,” says Brian Hill, a partner at Ball Morse Lowe in Norman, Oklahoma. “They can’t sell the asset and go buy a bigger personal home. Because of that, there could be tension.”
How to set up a GST
Work with an estate planning attorney to set up your GST. Some things to keep in mind:
Go slow. Setting up a GST involves at least three generations of people, so it’s essential to think through the process. “This is in place for a long time,” Hill says.
Talk to various advisors. Speaking with different people helps you think through all the different what-ifs, Hill says. Consider including tax professionals, financial planners and even other family members in your conversations.
Keep your appointment. People tend to cancel their appointments when they don’t have all the answers to questions that a lawyer may have sent them before their first meeting, Braverman says. This is a mistake. Working with a good attorney will help you get the answers you need.
Think about what you want your trust to encourage or discourage. Lawyers can put all kinds of provisions in trusts, Braverman says. Stipulations on substance abuse or GPAs or beneficiaries being self-supporting, for example, can help express the client’s overall intent.
GST mistakes to avoid
People often make two common mistakes, according to Braverman.
Naming family members as trustees. Money creates suspicions, and the trustee has a lot of power, she says. This can build resentment and cause problems.
Not considering who will be trustee if your original trustee passes. Consult with your attorney about who will take over if your original trustee can no longer handle the role. Braverman suggests three options for these successor trustees: Trust departments in large financial institutions, trust companies or professional, private fiduciaries.
Frequently asked questions
Can I only leave money to family members in a GST?
No. Money in a GST can go to grandchildren, grandnieces, grandnephews, or anyone who is at least 37.5 years younger than the grantor.
What is the beneficiary of a GST called?
A “skip” person is the beneficiary of a GST who is two or more generations below the settlor’s generation.
Is there a way to avoid paying the generation-skipping tax?
The IRS exclusion allows grandparents to give away $12.92 million in 2023 without paying this tax. This number is set to drop drastically after 2025 — to $5 million.
Buying a house is a dream for many Americans, but it can feel very out of reach for some people. To qualify for a mortgage, you’ll need an adequate credit score and down payment, which many people just don’t have.
That is where the Neighborhood Assistance Corporation of America (NACA) comes in. The NACA has helped hundreds of thousands of people find affordable housing with no money down and no minimum credit score. NACA also provides financial assistance for approved homeowners that encounter financial difficulties.
If you’ve been struggling to figure out how you’ll afford to purchase a home, then the NACA program could help. This article will explain how the NACA mortgage process works and how the organization could help you find your next home.
What is the NACA mortgage program?
The Neighborhood Assistance Corporation of America (NACA), a non-profit organization established in 1988, is dedicated to providing affordable housing options to Americans. Its mission is to combat discriminatory and unjust lending practices. With 45 branches across the United States, NACA assists borrowers with low credit scores in securing affordable mortgages.
NACA offers various solutions such as property improvement and foreclosure avoidance to help achieve this goal. Additionally, the organization helps homeowners reorganize their existing mortgages, preventing them from losing their homes to foreclosure. Nevertheless, NACA’s signature mortgage program remains the most sought-after offering among its services.
How does the NACA program work?
The NACA is known for its purchase program, which it calls the Best in America Mortgage Program. This program is designed to make homeownership more affordable for everyone.
If you applied for a mortgage through a bank or credit union, you would undergo an extensive credit check. But the NACA makes it possible to buy a home with:
No down payment requirement
No closing costs
No requirement for perfect credit
No limits on your income
No fees – The lender pays the appraisal costs, attorney fees, title insurance, transfer tax, settlement agent fees, and buyer closing costs.
All of this is available at a below-market interest rate. Currently, the NACA is offering a 30-year fixed-rate mortgage of 2.125% APR and a 15-year fixed-rate mortgage of 1.75% APR. You’d be hard-pressed to find a better deal anywhere else.
Bank of America stands as NACA’s largest and most significant partner, providing a major portion of the funding for the loans.
NACA Requirements and Qualifications
Before you assume the NACA mortgage program is too good to be true, there are certain requirements you’re going to have to meet to qualify. Unlike traditional lending practices, NACA evaluates creditworthiness based on character, rather than solely relying on credit scores.
For instance, NACA members won’t be penalized for financial hardship caused by an injury or illness. But you must demonstrate that you can afford to pay your monthly housing expenses.
These expenses include your mortgage payments, property taxes, homeowners insurance, and HOA dues. And your income can’t fluctuate from month to month.
While there are no income restrictions in the NACA purchase program, earning higher than the median income could limit your home buying options to specific regions. It’s also worth noting that owning another property while closing on a NACA mortgage is strictly prohibited.
Furthermore, as a NACA mortgage recipient, you are expected to engage in a minimum of five membership activities annually. These activities include volunteering at NACA offices, participating in protests, or offering support to other members during the home buying process.
Eligible States
Unfortunately, the NACA mortgage program still isn’t available everywhere, though the organization is working hard to expand across the U.S. It’s currently available in the following states:
Alabama
Arkansas
Arizona
California
Colorado
Connecticut
District of Columbia
Florida
Georgia
Hawaii
Illinois
Louisiana
Massachusetts
Maryland
Michigan
Minnesota
Missouri
Mississippi
North Carolina
New Jersey
Nevada
New York
Ohio
Pennsylvania
South Carolina
Tennessee
Texas
Virginia
Wisconsin
NACA Program Pros and Cons
Here are some of the biggest advantages and disadvantages of taking out a mortgage through the NACA.
Pros
Buying a home with no down payment or standard closing costs
Snag a below-market interest rate on a 15-year or 30-year mortgage
No credit requirements or income limits to apply
Receive extensive borrower education and training
Cons
Time-consuming application process
Program isn’t available in all 50 states
There are limits to how much you can borrow
You’ll have to pay for property taxes and homeowners insurance
NACA Loan Limits
The NACA home buying program has loan limits that cap your mortgage amount. The purchase price of a home cannot exceed the conforming loan limit, which is $647,200 for a single-unit property in most states. The conforming loan limit for a single-unit home in Alaska and Hawaii is $970,800.
Who qualifies for the NACA program?
The NACA mortgage program is very generous, but there are several steps you’ll need to take before you can close on your home. Here are the seven steps you’ll take to complete the NACA loan qualification process.
1. Attend a free homebuyer workshop
If you’re considering applying for a NACA mortgage, you’ll first have to attend a homebuyer workshop. During this free workshop, you’ll learn more about homeownership and how to qualify for the NACA mortgage program. Then, you can register on the company’s website to reserve your spot.
2. Meet with your housing counselor
Once you’ve completed the homebuyer workshop, the NACA will assign you a housing counselor to guide you through this process. Your housing counselor will help you determine an affordable monthly mortgage payment and help you come up with a reasonable monthly budget. You’ll continue to meet with your counselor until you’ve qualified for the NACA housing program.
3. Attend a NACA purchase workshop
Once you’ve qualified for the mortgage program, you must attend a purchased workshop at the NACA office. During this workshop, you’ll review the home purchase process and work with a real estate agent to help you find the right home.
4. Receive a property qualification letter
Once you’ve chosen the home you plan to buy, you’ll have to get in touch with your housing counselor again. They will help you secure your qualification letter.
This letter states that you are qualified to purchase the home you’re interested in. Your NACA counselor and real estate agent can also help you draft an offer on the home.
5. Get your home inspected
Before you can purchase a home, it must pass a NACA home inspection and pest inspection. If the inspection reveals any problems with the home, you must resolve those issues before you can close on the home.
6. Meet with your mortgage consultant
Throughout this entire mortgage process, you should be saving money, maintaining your income level, and paying your bills on time. At this point, you’re going to meet with your mortgage consultant to prove that you’ve met the required guidelines and are ready to move forward with the mortgage application.
7. Close on your mortgage
Now it’s time to close on your home! There are no closing costs for a NACA mortgage. Additionally, NACA members do not pay private mortgage insurance (PMI).
Instead, your NACA membership provides you with a post-purchase assistance program through NACA’s Membership Assistance Program (MAP). But this is the final step that allows you to close on your new home and finalize the process.
Alternatives to the NACA program
The NACA program may not be suitable for everyone, or you may not qualify. If this is the case, consider other mortgage programs that may be available to you.
FHA Loans
For low-to-moderate income borrowers who may not meet the stringent requirements of conventional loans, the Federal Housing Administration offers the FHA loan program. With lower down payment needs and more lenient credit score standards, these loans provide a viable option for those looking to finance their first home.
USDA Loans
The U.S. Department of Agriculture extends its support to those seeking to purchase a home in rural or suburban areas through its USDA loan program. These loans offer attractive terms such as low or no down payment options and competitive interest rates, with the aim of fostering home ownership in less densely populated regions.
VA Loans
As a way to show appreciation for the sacrifices made by military service members, veterans, and their surviving spouses, the Department of Veterans Affairs provides VA loans.
These loans, exclusive to eligible individuals, boast features such as no down payment requirement, no private mortgage insurance, and interest rates that are often more favorable than those of traditional loans.
First-Time Homebuyer Programs
For those entering the housing market for the first time, many states and local governments offer programs tailored to their needs. First-time homebuyer programs often provide financial assistance in the form of lower interest rates and down payment assistance, as well as other incentives, making homeownership a reality for those who may not have the funds for a down payment otherwise.
Down Payment Assistance
To help alleviate the burden of the upfront costs of buying a home, down payment assistance (DPA) programs are available from government agencies, non-profit organizations, and private lenders.
These programs provide homebuyers with the necessary funds to cover their down payment, allowing them to get one step closer to affordable homeownership.
National Homebuyers Fund
As a non-profit organization, the National Homebuyers Fund offers down payment assistance to low-and moderate-income homebuyers in the form of grants that do not need to be repaid. Their mission is to provide a helping hand to those who may not have the resources to make a down payment on their own.
Chenoa Fund
The CBC Mortgage Agency’s Chenoa Fund is a down payment assistance program that provides low-and moderate-income homebuyers with up to 3.5% of the home’s purchase price. This support is provided through either forgivable or repayable second mortgage loan options.
Bottom Line
If you’re concerned that you don’t have the down payment or credit requirements necessary to apply for a traditional mortgage, a NACA mortgage may be a suitable option. Borrowers that qualify could receive low-interest mortgages with no down payment, closing costs, or fees. The application process is tedious, but the benefits can help you achieve the dream of homeownership.
Frequently Asked Questions
Is there a minimum credit score requirement for the NACA program?
No, NACA does not consider credit scores for mortgage approval. Instead, they look at your payment history and ability to make future mortgage payments.
Is there an income limit to qualify for the NACA program?
There is no strict income limit to qualify for the NACA program. The program is designed primarily to assist low- to moderate-income individuals and families, but it does not set an upper limit on income. The focus is more on your ability to afford the mortgage payments, and whether you meet other program criteria.
How long does the NACA mortgage process take?
The time frame can vary depending on individual circumstances, but generally, it takes several months from attending the initial workshop to closing on a home. The more promptly you can provide the required documentation and fulfill program requirements, the quicker the process will likely be.
How does the NACA mortgage differ from a traditional mortgage?
NACA mortgages typically offer more favorable terms compared to traditional mortgages. They come with no down payment, no closing costs, and no requirement for private mortgage insurance (PMI). The interest rates are often below market rate as well.
Can I use a NACA mortgage to refinance my existing loan?
No, NACA mortgages are designed for the purchase of a primary residence only. They cannot be used for refinancing existing loans or for investment properties.
The Empire State’s real estate market is a bit of a mixed bag. On the one hand, parts of New York City and the Hamptons are among the priciest housing markets in the entire country. But the rest of the state, which is quite large, is full of cities like Buffalo, Rochester and Syracuse, all of which have median home prices of just $200,000 or less (according to July Redfin data).
Whether you’re buying in Long Island or selling in Lake Placid, there’s one part of the real estate transaction that you can’t avoid: closing costs. Here’s what to expect when it comes to closing costs in New York.
How much are closing costs in New York?
Closing costs vary by state, and New York is on the high side with an average rate of 3.1 percent of a home’s sale price, according to CoreLogic’s ClosingCorp. By comparison, Connecticut’s rate is 2.1 percent and New Jersey’s is 1.7 percent.
Data from the New York State Association of Realtors shows that July 2023’s median sale price for the state was an even $400,000. Applying the rate of 3.1 percent, that means closing costs of $12,400.
That number will vary greatly depending on home prices in your local market, though, and prices tend to get higher the closer you get to New York City. According to Redfin, the July median in Westchester County, just north of the city, was $770,000, which would result in closing costs of $23,870. But in Potsdam, not far from the Canadian border, the median is just $175,000, meaning closing costs of $5,425.
Who pays closing costs in New York, buyers or sellers?
Whether you’re buying or selling in the New York housing market, You will be responsible for some amount of closing costs.
Closing costs for buyers
As a homebuyer, most of your closing costs will relate to your mortgage loan. Here are some of the most common closing costs for buyers:
Loan-related fees: Many lenders charge borrowers loan application and origination fees, as well as a fee to check your credit history. If you are paying points on your mortgage, which typically bumps down your interest rate by 0.25 percent for every 1 percent of your loan amount, that fee will be part of your closing costs as well.
Appraisal and inspection fees: Your lender will likely require a professional home appraisal to confirm the home’s value (and make sure it’s worth at least the amount you’re borrowing). It’s smart, but not required, to get a professional home inspection as well. This will alert you to any problems with the home and property before they become your problem. If a major problem is discovered, you may be able to use it as a negotiation point. Expect each to run a few hundred dollars.
Title-related fees: Similar to a background check, a title search is conducted to confirm ownership and make sure that there are no liens or claims on the property. Title insurance protects you (as the new owner) and the lender if any issues arise after the deed is transferred. In some states, the seller pays for title insurance, but in New York, it’s typically the buyer. The cost will depend on your loan amount.
Taxes: At closing, you’ll likely need to prepay a portion of the year’s property taxes as determined by your local jurisdiction. These funds will be held in escrow and distributed on your behalf. Sellers pay for the base transfer tax in New York, but if you’re buying a home for over $1,000,000, you’ll be on the hook for an additional fee in the form of the state’s mansion tax, which starts at 1 percent of the sale price and gets higher the more expensive a home gets.
Attorney fees: The state of New York requires both homebuyers and sellers to be represented by an attorney at closing, so add legal fees to the list.
Closing costs for sellers
Sellers aren’t off the hook just because they’re not taking out a mortgage. Here are some of the most common closing costs for sellers:
Agent commissions: Realtor fees will be your largest expense when selling your home. Commissions typically run between 5 and 6 percent of a home’s sale price, which means the amount can be steep. On a median-priced $400,000 home, 5 percent comes to $20,000.
Transfer taxes: As the seller, you’ll need to pay New York’s real estate transfer tax, which is $2 for every $500 in home value. On a median priced $400,000 home, that’s $1,600. In New York City, an additional city tax applies.
Attorney fees: The state of New York requires both homebuyers and sellers to be represented by an attorney at closing.
Seller concessions: If you made any concessions to the buyer, such as offering to pay for a repair, they’ll be settled at closing time and taken out of the sale price.
Wire transfer fee: If there’s a balance left on your mortgage, it will be taken out of your sale proceeds and wired to your lender. There may be a fee for this.
Lowering your closing costs in New York
You might be surprised to learn that many closing costs are negotiable (except for government-assessed fees like property and transfer taxes, of course).
For home sellers, your most expensive cost is also one of the most commonly negotiated: the Realtor commission. If your agent is willing to lower their commission by even a little, it could save you a lot. For example, a 5.5 percent commission on a median-priced $400,000 home, rather than the full 6 percent, will save you $2,000.
Buyers can explore down payment assistance programs, which help cover closing expenses for qualified buyers via low- or no-interest loans, grants and more. There are options specifically for first-time homebuyers in New York as well. And remember that different lenders may offer different rates, terms and fee structures, so be sure to shop around for the best deal. Don’t be afraid to ask the seller for concessions, either. They might not agree to pay for that plumbing repair (for example), but it doesn’t hurt to ask.
Find a local real estate agent
New York’s real estate market is unique and complex, and the best way to navigate it is with the help of an experienced local real estate agent. If you don’t have one, a great place to start is by asking for referrals from friends and family. Do some online research, too. Interview a few different candidates to find someone who’s a good fit — and if you can find someone who knows your specific area very well, or even your specific neighborhood, all the better.
FAQs
According to data from ClosingCorp, closing costs in New York average 3.1 percent of a home’s sale price (not including agent commissions). The median price in the state was $400,000 as of July, per the New York State Association of Realtors, so the closing costs on a median-priced home would come to $12,400.
Real estate agent commissions, typically paid by the seller, are the most expensive part of closing costs, typically totaling between 5 and 6 percent of a home’s sale price. For a median-priced $400,000 New York home, 5 percent comes to $20,000.