Know Your Closing Costs

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That's 800-525-7000. This is faith and finance, biblical wisdom for your financial decisions. Well, many people get so excited about finally being able to buy a home that they don't pay attention to the long list of closing costs included with the purchase.

Why bother? They think since in most cases, those costs will be rolled into the loan amount and paid over a very long time. So how much are they? Well, for a typical mortgage closing costs may run three to 6% of the mortgage amount. So let's say you borrow $250,000 to purchase your first home at six and a half percent interest on a 30 year loan. Your monthly payment would be $1,580. Let's assume the worst and your closing costs are $15,000. You elect to have that rolled into the mortgage amount. Now you're actually borrowing $265,000, not $250,000. That increases your monthly payment by $95. Multiply that by 360 payments and your true closing costs are over $34,000.

Okay, that was a lot of numbers, so I'll simplify things. Closing costs matter. And if you're buying a house, you need to pay attention to them and choose some that you can try to negotiate down.

You may not win, but it never hurts to ask. So here are some closing costs with wiggle room. Homeowners insurance. Your lender requires you to have it, but you can shop around for the best rates.

If the lender or even your agent suggests an insurer, don't assume it's the best one for you. Origination fee. This is supposed to cover the cost of underwriting the loan and usually runs about 1% of the loan amount. Always ask to have it waived or at least lowered.

It may not happen, but asking is free. Underwriting fee. You're thinking, did we just cover that with the origination fee? Well, some lenders charge an extra underwriting fee in addition to the origination fee or instead of it. It's another one the lender may be flexible on. Loan application fee. This is another one time fee the lender charges for processing all of those loan papers and again, underwriting the loan. Ask to have this fee waived, especially if you're already being hit with an origination or underwriting fee. Real estate commissions. For decades, sellers have paid the commissions of both the sellers and buyers agents, but a recent court settlement with the National Association of Realtors changed the landscape of real estate commissions and buyers may now find they're being asked to chip in for agent fees.

It's another place you can negotiate. Title insurance. You'll be required to buy a lender's title policy, which as the name implies, protects the lender and the lender only.

You can suggest a different issuer to your lender if you find one with a better rate. By the way, always purchase owner's title insurance to protect yourself in case someone challenges your ownership someday. Okay, those are the closing costs you can negotiate.

Here are some that you can't, so don't waste time trying. The appraisal fee, credit check fee, any government fees such as title transfers and recording costs, and of course property taxes, some of which may be collected at the closing table. With so much money changing hands, knowing that your mortgage company operates with the utmost integrity and openness will be comforting. Movement Mortgage, an underwriter of this program, can give you that peace of mind. Movement Mortgage is a Christian mortgage company founded during the 2008 housing crisis. Their mission is to help home buyers and glorify God by positively impacting communities within the United States and worldwide. Movement customers get competitive rates and a chance to participate in a global movement of change. How's that you ask? Well, the company has donated $377 million to projects that help local communities here and abroad. Movement Mortgage also has locations in all 50 states, and you can check them out at faithfi.com slash movement. That's faithfi.com slash movement. Okay, we've been talking about closing costs today.

There are many you can try to negotiate down and some you can't. We hope you find that information useful. All right, it's time to turn our attention to whatever is on your mind today. We'd love for you to get in on the conversation. The number to call 800-525-7000. That's 800-525-7000.

I'm Rob West and we'll be right back. We're grateful for support from Movement Mortgage, who provides residential home loans in all 50 states guided by a mission to love and value people and a goal to redefine the mortgage process. Movement seeks to help others achieve their financial goals. You can find out more at movement.com slash faith. Movement Mortgage LLC supports equal housing opportunity and MLS number 39179.

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That's 800-525-7000. We'd love to hear from you today. We've got lines open. Calls are coming quickly, though, so if you have a question today, I'd love for you to get in on the conversation right now. We'll get to you as quick as we can. Let's dive in.

We'll begin in Savannah today. Hi, Pete. Go ahead. Hey, Rob. How are you? I'm doing well. Thanks for your call.

Thanks so much for taking it. My question is, in the Christian context, not in secular is not involved in the question, but in a Christian context, are permanent endowments biblical? Yeah, and so what would be the context here? Are you thinking like a Christian university? Well, from any nonprofit, Christian university, Christian college, any NGO that has a permanent endowment, and my understanding of the permanent endowment is that the corpus or the original gift can never be touched, so it has no sunset provision.

Yeah, yeah, yeah, absolutely. I mean, it can be, it's held into perpetuity, meaning the income, only the income from the funds can be used, and it's typically a result of a grant or a gift, and it's meant to provide long-term income. You know, I think the only challenge with them is, you know, related to mission drift, and so if the organization drifts away from its original purpose, and I think a lot of the Ivy League schools would be an example of this that were founded on Christian theology and are a far cry from that today, and, you know, they'd be unrecognizable to their founders, and yet, you know, the permanent endowments are going to continue into perpetuity, the organization that has a completely different mission. And so I think that's the challenge, is how do you guarantee the mission? And, you know, a lot of foundations I know solve this by just making sure that the board of directors stays committed to the mission. I'm thinking of a family foundation in particular, where the funds are there in the foundation, they're invested, they're to be used for the advancement of the gospel, and they reread the charter of the mission of the Christian foundation before every board meeting, just because they want to remind themselves, what is our purpose?

Why was this money placed here by the steward, and what is the purpose for which we're carrying it out? So I think it can be a really good thing, and in some cases a Christian college would be a great example. I know some wonderful Christian universities that are still locked into their original mission and, you know, biblical worldview, but they won't hire until they have a certain amount of money in an endowment for a specific position because they want to make sure that it's funded into the future before they make that hire. Now, again, the challenge can be is if there's not the guardrails to keep them focused on the mission, but as long as they are, it can be, I think, a helpful way to make sure that the income is there to fund a particular position.

But, you know, that's not easy to do, and so you've got to have an organization that's absolutely committed to it. And so I think then the alternative is to not do that and to just trust that the funds are going to continue to be there, and if the mission shifts over time, well, those donors may go away, and that kind of keeps you honest, so to speak. So I think I'm not against it. I wouldn't say it's not biblical, but I would just say you need to absolutely keep the guardrails in place to make sure the mission drift doesn't occur. Does that make sense?

It does, and so that's the second-tier question. Really, my first-tier question, Robert, if you have time, would be is, you know, if I believe what I believe in, that Jesus is coming back, and that if these funds are going to be hay and stubble at the end, and so there is no reward for it. My question is maybe better is, is it good stewardship to put it in a jar in the ground? Yeah, well, that's a great question, and I see what you're getting at, but I think the idea is what does it look like to live in such a way that we can continue to give more and more, even during our lifetime, and to your point, making sure that we're getting it into circulation, into God's economy, and not having it just sitting somewhere, whether that's a permanent endowment or even a donor-advised fund. You know, we can use donor-advised funds as a wonderful tool to, you know, avoid taxes like capital gains and so forth, but if that money then just sits in the donor-advised fund and it doesn't get into the kingdom, well, you know, I think to a point that's okay, but in another respect, why is it sitting there, and why aren't we releasing it into circulation for such a time as this, because, you know, we don't know the day or the hour, and we want to bring as many people with us to the kingdom as possible.

So I think that comes down, Pete, to a conviction matter. I think that's something we all need to be praying about. I'm glad you're raising it, because hopefully by you doing so, it's even challenging some others to be thinking about, maybe I shouldn't make that legacy gift that's going to continue into perpetuity. What if I get it in to make a gift of the same amount that can be deployed for the sake of the gospel today or tomorrow or next week, and is that a better use of this money as the steward that has been entrusted with these funds by the Lord? I think that's something we should be praying about and ultimately would be a conviction issue. Well, thanks so much for your help, Rob, and it brings more questions, and I know it's short timing, so I'll let you move on, but for me it continues to go deeper, much deeper, because living here and now, and day to day, and not worried about the future, it's as if I'm storing up treasures on earth, I'm not storing them up in heaven.

I can't have my cake and eat it too. Yes, yeah, that's right. I think you're exactly right, and Randy Alcorn actually has an article, and the title is, Will We Be Rewarded for Leaving Money to Christian Ministries in Our Wills?

And it's just a really interesting discussion about this very topic, about giving now versus later, and if we don't give today, the economy may change, which means we have less to give, our hearts may change, he says our lives may end before we've even given it, and he has a pretty compelling conversation about this as well in that article. So hey, Pete, thanks for your call today. God bless you, sir. Let's go down to Ocala, Florida. Hi, Bunny. How can I serve you?

Hi. My husband had a TIAA that he took out when he was an adjunct professor at the local community college. It's just a small amount, and because I'm 76, I've been having to require to take a certain amount out each year. I would like to give this to my son now so that those amounts can stay in there and start accruing interest. Can I do that?

No, unfortunately you would not be able to do that. So you inherited this because you were the beneficiary on that account, and that's now your account, and you can't just transfer it as a retirement account to someone else, even a family member. What you would have to do would be to take the full amount out, which would all be taxable. It would be a taxable distribution, so you'd probably, if you did that, want to withhold the portion of the proceeds when they write you a check to be able to pay the tax bill. And then you could make a gift to your son of that amount, but you wouldn't be able to give him the retirement account without taking the money out as a taxable distribution.

Does that make sense? Yes, yes. Okay. Now, you could name him as your beneficiary so that if you passed away, he would get it as an inheritance, and then he would have to continue to take the money out over time on a scheduled basis.

But in terms of you being alive, the only way to get it to him would be to take it out, pay the taxes, and then hand the money over to him. Right. Thank you.

He is already my beneficiary. Okay, very good. Yeah, excellent. Well, thank you for calling, Bunny. All the best to you. All right, a quick break and back with much more, including your questions. Call right now with a financial question, 800-525-7000.

We'll be right back. more people into God's kingdom. Instead of chasing wealth, you've chosen to embrace God as your source of love and provision. At Faithfi, we're passionate about meeting people where they live and work through our national radio program, app, resources, and website to influence widespread positive change in our culture. Please consider becoming a monthly partner at faithfi.com slash give. Great to have you with us today on faith and finance for taking your calls and questions today on anything financial.

We've got our final segments underway right now. We've got room for you. If you have a question call right now, 800-525-7000. That's 800-525-7000. Let's go to Virginia. Hi, Donna. How can we help you?

Hi. Well, I have a couple things about the sale of a rental house and the long-term gains. My goal is to mitigate the taxes on it, and I know that I decided not to do a 1031. I made an attempt on a charitable gift annuity, and that didn't work.

So anyway, I'm wondering if we have to do the RMD every year. Can I take some of this money from the rental house and put it toward my RMD, or does that only have to come out of an IRA? It does only have to come out of an IRA or a 401k, so that would not work here.

You could do a qualified charitable distribution out of your IRA. But as to the home, let me just ask, are you married filing jointly with your tax status? Yes. Okay. And is your income between $94,000 and $580,000? Yes.

Okay. So you'd be at the 15% capital gain rate, long-term capital gain rate on the gain for the sale of that rental property. Now, if you're wanting to do some giving out of this money and minimize capital gains, one approach would be you essentially gift a portion of this property. You could do the whole thing, but you don't have to. You could give a percentage of this property to a donor advised fund, which is just like a charitable checking account.

I'd recommend you use our friends at the National Christian Foundation. And by doing so prior to the sale, when the home is sold, you've already given away, quote unquote, that portion of the property. And so that would just immediately fund your donor advised fund, your charitable checking account, equal to the percentage of the property out of the proceeds of the sale. And that portion of it would not be subject to capital gains. And then at that point, you've, quote unquote, given the money away to your donor advised fund, and then you would recommend the grants out of that to the ministry or charity or church of your choice at any point from that point forward.

Does that make sense? Well, my question is, we're already doing that through our RMD every year, giving out of that. Okay. And we already have a donor advised fund.

Okay. All I was trying to do is say, if you're looking to specifically on the sale of this property, if you're looking to minimize capital gains, and you're wanting to do additional giving, one of the ways to minimize capital gains is giving away all or a portion of the property to the donor advised fund before you sell it. And so if that's what if you're looking to give more and minimize capital gains, that's really the only way to do it is to give it away prior to the sale. Or you can't gift it to somebody, it has to be to a charity. I mean, if I just wanted to gift money to someone, I could do that too. Yeah, you could gift the home to someone. Are you talking about the rental home still? Well, yes, I'm talking about the capital gains from the rental home.

I could gift that say to a son or daughter or a grandchild. But they would keep your cost basis. So the capital gains would eventually have to be paid. So you're not getting around, the only way to get around the capital gain is either through a 1031, which you decided not to do, or to give all or part of the property away charitably prior to the sale. And then that portion of the sale is excluded from capital gains tax. Okay, got that.

All right. And as you probably know, my second question was about whole life insurance. My husband took out a policy like when he was 20 years old, and we've been paying on it all this time. Is there ever a time when whole life insurance is beneficial?

Yes, very few cases in my view, others will will disagree with that. Where it's beneficial is when you have a lifelong dependent, somebody who has a need for insurance throughout your whole life and beyond. And that's where it's worth paying the expense of a whole life policy even into your 70s 80s and 90s. If you have a buy sell agreement on a business where you need to fund that through a life insurance policy, you know, I mean, those would be examples of where you would want to hang on to that. Otherwise, you're probably in a situation where you no longer need this insurance, you have other assets. You know, there was a time where this was providing a death benefit that was necessary to offset a risk for a husband or his for you, his wife, while he was working.

That's no longer the case. So I would say in most cases, I would just take the cash value and cancel the policy and recoup that monthly or quarterly or annual premium that you're paying. Well, they're telling us now that the premium is being taken out of our policy value and we don't have to pay it. Right, but it's reducing the cash value you could pull out today if you were to cancel the policy. Right. Well, he took it out when he's 20. He's 74 now.

Yeah. What's the cash value on it today? I think somewhere around $35,000.

I'm not sure. I'm just looking at several policies. It's so hard to keep up with all of it, but I'm looking at one here that's a $50,000 one. I know he has $100,000 one.

The face amount is 50 and the cash surrender value is $24,766. I guess when you've been paying all these years, it's like, really? Yeah, exactly. But at the end of the day, depending on how long you all live, you could end up collapsing that policy if that cash value dwindles down to zero and then you'd have to decide do you want to continue to pay the mortality expense on it.

So that's where I think taking that $25,000 today and putting that to good use versus letting it just slowly chip away, you know, I would probably cancel the policy despite how long you've had it. Okay, great. Well, thank you so much for your advice and for your patience and my rattling I am because I know it can be complicated.

Oh, no, it's a great question. Donna, you and your husband sound like wonderful people that just want to honor the Lord and obviously you're giving generously along the way. So well done, good and faithful steward. Thank you for being on our program today.

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