Common Closing Costs for Buyers
The myriad of fees associated with the buying or selling of a home are called closing costs. Some fees are automatically assigned to either the buyer or the seller while other costs are either negotiable or dictated by local custom. Your lender must provide a good faith estimate of all settlement costs prior to closing- the title company or other entity conducting the closing will tell you the required amount to bring to the closing.
Typical Buyer Closing Costs
- Down payment
- Loan origination fees
- Points, or loan discount fees you pay to receive a lower interest rate
- Appraisal fee
- Credit report
- Private mortgage insurance premium
- Insurance escrow for homeowners insurance, if being paid as part of the mortgage
- Property tax escrow, if being paid as part of the mortgage.
About escrows - lenders keep funds for taxes and insurance in escrow accounts as they are paid with the mortgage, then pay the insurance or taxes for you. Note: when financing more than 80% (LTV), escrowed property taxes and insurance are required, which will increase your monthly mortgage payment. - Deed recording fees
- Title insurance policy premiums
- Survey
- Inspection fees-building inspection, termites, etc.
- Notary fees
- Prorations for your share of costs such as utility bills and property taxes
A Note About prorations - At the closing, certain costs are often prorated (or distributed) between buyer and seller. Because such costs are usually paid on either a monthly or yearly basis, you might have to pay a bill for services used by the sellers before they moved. Proration is a way for the sellers to pay you back or for you to pay them for bills they may have paid in advance.
The most common prorations are for property taxes. This is because property taxes are typically paid at the end of the year for which they were assessed. Thus, if a house is sold in June, the sellers will have lived in the house for half the year, but the bill for the taxes won't come due until the following year. To make this situation more equitable, the taxes are prorated. In this example, the sellers will credit the buyers for half the taxes at closing.
Avoid Closing Delays
Your closing can be delayed by a number of issues including:
- clouded title
- a home not appraising for value
- encroachments or other survey issues
- a rapid change in interest rates
- an undisclosed credit or income issue
- inspection or repair problems
- or one of countless other unanticipated issues.
Don't buy your home without my assistance! I understand what it takes to help you through your closing and can handle much of the work involved throughout the transaction with the least amount of stress to you.
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