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You've
found your dream home, the seller has accepted your offer, your loan
has been approved and you're eager to move into your new home. But
before you get the key, there's one more step—the closing.
Also
called the settlement, the closing is the process of passing
ownership of property from seller to buyer. And it can be
bewildering. As a buyer, you will sign what seems like endless piles
of documents and will have to present a sizeable check for the down
payment and various closing costs. It's the fees associated with the
closing that many times remains a mystery to many buyers who may
simply hand over thousands of dollars without really knowing what
they are paying for.
As
a responsible buyer, you should be familiar with these costs that
are both mortgage-related and government imposed. Although many of
the fees may vary by locality, here are some common fees:
- Appraisal
Fee:
This fee pays for the appraisal of the property. You may already
have paid this fee at the beginning of your loan application
process.
- Credit
Report Fee:
This fee covers the cost of the credit report requested by the
lender. This too may already have been paid when you applied for
your loan.
- Loan
Origination Fee:
This fee covers the lender's loan-processing costs. The fee is
typically one percent of the total mortgage.
- Loan
Discount:
You will pay this one-time charge if you have chosen to pay
points to lower your interest rate. Each point you purchase
equals one percent of the total loan.
- Title
Insurance Fees:
These fees generally include costs for the title search, title
examination, title insurance, document preparation and other
miscellaneous title fees.
- PMI
Premium:
If you buy a home with a low down payment, a lender usually
requires that you pay a fee for mortgage insurance. This fee
protects the lender against loss due to foreclosure. Once a new
owner has 20 percent equity in their home, however, he or she
can normally apply to eliminate this insurance.
- Prepaid
Interest Fee:
This fee covers the interest payment from the date you purchases
the home to the date of your first mortgage payment. Generally,
if you buy a home early in the month, the prepaid interest fee
will be substantially higher than if you buy it towards the end
of the month.
- Escrow
Accounts:
In locations where escrow accounts are common, a mortgage lender
will usually start an account that holds funds for future annual
property taxes and home insurance. At least one year advance
plus two months worth of homeowner's insurance premium will be
collected. In addition, taxes equal approximately to two months
in excess of the number of months that have elapsed in the year
are paid at closing. (If 6 months have passed, 8 months of taxes
will be collected.)
- Recording
Fees and transfer taxes: This
expense is charged by most states for recording the purchase
documents and transferring ownership of the property.
Make
sure you consult a real estate professional in your area to find out
which fees—and how much—you will be expected to pay during the
closing of you prospective home. Keep in mind that you can
negotiate these costs with the seller during the offering stage. In
some instances, the seller might even agree to pay all of the
settlement costs.
If you have questions about this or any other
home buying or selling subject, confer with the real estate
professionals who can help provide you with more detail…
We
can be reached at (310) 265-2130
Prudential California Realty is an independently owned and operated
member
|of The Prudential Real Estate Affiliates, Inc., a Prudential
Financial company.
Equal Housing
Opportunity
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