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Buyer Tip: What are Closing Costs and Prepaid Expenses?
What are closing costs?  When you select a bank or credit union for your financing, they will go over a good faith estimate of costs that you can expect at the closing.  Closing costs can be paid by you or you may ask for the seller to credit you for a portion of these costs.  When you write an offer for a home, your REALTOR can request that the seller contribute X amount for buyer's closing costs and/or prepaid expenses.  What is the difference between closing costs and prepaid expenses?  Let's take a look at each of them.
 
Closing Costs--These are the costs associated with obtaining a mortgage and can include things like:
1. Origination/commitment fees (these fees are not typically charged by credit unions, larger banks like Wells Fargo or US Bank may have these fees, usually 1% of the mortgage amount)
2. Flood certification
3. Employer verification
4. Appraisal
5. Title Opinion/Title Guaranty
6. Abstracting
7. Recording Fees
8. Credit Check
 
 
Prepaid Expenses--These are the other costs associated with purchasing a home and can include things like:
1. Homeowner's insurance (which is paid upfront for the 1st year, then paid monthly as part of your mortgage payment for subsequent years)
2. Whole house inspection
3. Radon inspection
4. Pest/Termite Inspection
5. Buy-down of the ... more

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