Should You Pay For Closing Costs In Orange County CA? Options For Paying Your Closing Costs In Orange County CA

Should You Pay For Closing Costs In Orange County CA?

Should You Pay For Closing Costs Or Finance Them Into Your Home Loan?

Clients often ask whether or not they should pay for their closing costs when they are buying a home in Orange County, California, or refinancing their existing home loan. This is a question that does not have a simple black or white answer, and numerous factors must be considered when making this decision. You will have to look at your options, based on your individual circumstances, to determine the most cost effective way for you to pay for your closing costs.

If at all possible, I typically suggest that clients pay their closing costs up front, and out of their own pocket. However, there are situations that necessitate rolling the closing costs into a home loan or using a no cost option.

How To Narrow Down Your Options

When trying to determine the best course of action, you should always consult with your mortgage professional, who will take the following questions into account and advise you accordingly:

What is the purpose of your loan? Are you refinancing or buying a home in Orange County, California?
If you’re buying a home in Orange County, California, will it be your primary residence, or is it an investment property?
How much will your closing costs be?
For a refinance, how long will it take you to recoup the closing costs, based on the monthly savings?
How long will you have the home loan, or own the property?
Do you have enough equity in your home, to roll the closing costs into the new mortgage? This question only applies if you’re refinancing your existing home loan.
Do you have enough money to pay for closing costs, in addition to your down payment and reserve requirements?

3 Options For Paying Closing Costs For Your Orange County CA Home Loan

Once you have determined the answers to the above questions, you may find that some of the 3 options shown below do not apply to your situation, or are not feasible.

Option #1- Pay Your Loan Fees Out Of Pocket, At Closing

Pros of Option #1

Your loan amount does not increase.
You will receive the lowest interest rate available, based on your personal profile.
You will realize long term savings based on a lower loan amount and lowest possible interest rate.

Cons of Option #1

Your cash reserves will be reduced, which could leave you vulnerable in an unexpected situation such as job loss, disability, illness, etc…
If you are a real estate investor, or plan on living in your home for less than 3 years, this option is typically not cost effective.

Option #2- Roll The Closing Costs Into Your New Loan Amount

Pros of Option #2

Allows you to refinance your home loan, even with limited cash on hand.
You retain your cash reserves, in case of emergency, or for other purposes.
Cost effective option for an Orange County, California real estate investor or a borrower that plans to keep their home for a short period of time.

Cons of Option #2

Your monthly payment will increase slightly, based on the new, higher loan balance
Your monthly payment may increase a great deal, due to PMI (principal mortgage insurance) costs that you will incur if your new loan exceeds 80% of your home’s value.
This option is typically not available for a purchase home loan, and can only be used to refinance your home.

Option #3- You Obtain A No Points, No Fees Home Loan

Pros of Option #3

You retain your cash reserves, in case of emergency, or for other purposes.
This option is available whether you are refinancing your home loan, or buying a home in Orange County, California.
Cost effective option for an Orange County, California real estate investor or a borrower that plans to keep their home for a short period of time.

Cons of Option #3

Typically the most costly of the 3 options, if you will be keeping your home loan for longer than 2 to 3 years, due to the higher interest rate that you will be required to pay.

As you can see, you will need to work with an experienced Orange County, California mortgage professional to help you identify the option that suits your needs and personal circumstances, as not everyone should pay for their closing costs in the same manner.

About the author, Gina Lemos, and our Orange County, California team of Realtors®

We are members of the Pacific West Association of Realtors®, proudly serving home buyers and home sellers in Orange County, California, and the surrounding areas.

We specialize in homes for sale, and marketing homes to sell in Anaheim Hills, Brea, Corona, Norco, Orange, Orange Park Acres, Placentia, Tustin, Villa Park, and Yorba Linda, California

We hope that you’ll visit our site frequently to search for homes for sale in Orange County, California, and please contact us if we can assist you with any of your Orange County, California real estate needs.

Gina Lemos

Licensed Realtor® and Mortgage Loan Originator

8181 E Kaiser Blvd

Anaheim Hills, CA 92808

P: (714) 721-6024

F: (714) 998-3678

Gina@OCRealEstateAndLoans.com

CA DRE # 01277795 NMLS # 325704