Here, we will be covering the topic of out of pocket expenses. When going through the motions of the mortgage process, it is important to figure out how much you want to pay out of pocket to cover all costs. We suggest you ask yourself how much you can afford out of pocket for a down payment, as well as all closing costs. You should keep in mind that your down payment is a percentage of your loan, but on top of that you have closing costs and items that are referred to as prepaid items. There are a few key differences between closing costs and prepaid items that home buyers going through this process should be aware of. Closing costs are a onetime cost that are associated with getting the loan done. On the other hand, prepaid items are things that will continue to be paid on a regular basis. These items may consist of insurance on your home, which must be prepaid for the first year.
The bottom line is that money is still coming out of your pocket up front. Knowing this, make sure you are clear with your loan officer that you want to know exactly what all your expenses will be. It is very important to be aware of this information, and it is equally important to make sure that you do not go over the number that you established as cash out of your pocket. By following these tips, you can be sure that you are not paying more out of pocket than you are comfortable with.