There are three basic costs that are associated with purchasing a home. These costs include: 1) down payment, 2) pre-paids and 3) closing costs. There are a few different ways to go about paying these costs. For instance, the seller may be able to pay the pre-paids and closing costs. But the most reliable way to find out which option is best for you is to speak with a CUHLC experienced loan officer.

The following is a short description of each purchasing cost and what it entails:

The down payment is a percentage of the purchase price. It could be anywhere from 3.5% (the lowest available downpayment requirement) up to as much as you would like. However, if you put less than 20% down, most lenders will require Private Mortgage Insurance (PMI), which is an insurance fee that protects lenders against loss if a borrower defaults. PMI can be discontinued once an 80% loan balance is reached at the home’s current value at the time you wish to cancel.

Pre-paids consist of property taxes, homeowners insurance, daily interest through the end of the month and the amount needed to establish an escrow account for paying property taxes and insurance. Therefore, pre-paids will vary depending on the price (value) of the home as both property taxes and insurance based first on the value of the home and the value will vary from county to county and the state that the property is in. Your loan officer will prepare a "Good Faith Estimate" for you that will identify these costs.

Closing costs are made up of services and/or products that are required to complete a home loan. These items will include appraisals, credit reports, title insurance, escrow, county recording, flood determination, tax service, processing, underwriting and other fees and points.

Many of the closing cost items are a fixed amount and will be consistently the same for all loans. However, some of the items of closing costs are based on the purchase price and/or loan amount. Therefore closing cost will vary with each transaction. Your "Good Faith Estimate" will itemize these items along with the pre-paid items.