Many will say the end of the month because the per diem interest you have to pay will be less (thus lower closing costs). However the end of the month is ALWAYS the busiest and everyone is trying to cram last minute deals in. I like to close my deals right about mid-month just before the end of month flurry. You as a Cusotmer will get better attention this way. Unless of course my customer needs max cash.
If you close month end you better make sure you have all your ducks in a row. When your Loan Officer asks for something, better be ready to send it in ASAP. If you wait you run the risk of closing the beginning of the next month. Your per diem interest just went from 3 days to 30! There goes that extra $1500 you wanted for a new flat screen tv ; )
Normally the best time to close on a mortgagewould be towards the end of the month. The pre-paid interest is calculated from the day you close on your purchase. On a refinance it will be calculated from the day the loan comes out of recession until the 1st of the following month.
The interest per day is calculated on your loan amount and interest rate. For example, a $100,000.00 loan amount, 30 year fixed interest rate of 6% would calculate out to being $16.44 a day. If you close a purchase loan on February 1st you will be paying $467.71 in interest versus closing on February 28th and paying $32.88 in interest. You will not have a payment due on the loan with this scenario until April 1st.
Also most lenders have what is called an interest credit if your loan is closing towards the beginning of the month (normally before the 7th). The interest credit will be given to you as a credit at your closing for the interest you would of paid. Using the same example as above, you close your loan on February 4th you will see a credit now on your closing statement of $65.76. When choosing to do the interest credit on your loan your first payment will be due on March 1st.
Month end closes are “good” for purchases. Although one should realize that a close at the front end of the month affords you a longer period to rebuild funds for your first payment. For example: You close your purchase on March 10. Your first payment wouldn’t be until April 1 if you pay 21 day of interest for March at closing.
On refinances, it’s less critical. You’ll be paying the first part of the month’s interest to the current lender (the one being paid off) and the remaining days will be paid on the new mortgage. If it’s a primary residence with a rescission period, the reality is that you will be paying interest on both loans during the rescission period. Even if you do an interest credit, you’ll be paying that interest on the first of the next month.