What are closing costs? Who pays them buyer or seller, and are they negotiable? I get asked this question very often by first time homebuyers. Listed below are some typical closing costs you may incur as part of your loan transaction. When you apply for a loan application you will receive a Good Faith Estimate of closing costs and settlement charges, and a booklet that will explain these costs by your mortgage lender.
This is a one-time fee that pays for an appraisal. The appraisal is made by an independent fee appraiser.
Credit Report Fee:
A one-time fee that covers the cost of the credit report.
Document Preparation Fee:
There may be a separate fee that covers the preparation of the final legal papers.
A one-time fee used to adjust the yield on the loan to what market conditions demand. It is often called "points."
Loan Origination Fee:
The lender's administrative costs in processing the loan are covered by this fee.
Miscellaneous Title Charges:
The title company may charge fees for a title search, title examination, recording fees, and notary fees.
HOA Dues (Homeowner Association Dues)
Your lender will normally collect 2 (two) months of HOA dues for reserves in case you miss one. Plus, its also so that they can open an account with the management company.
You might be required to pay an up-front fee for mortgage insurance depending upon the amount of your down-payment. Lenders may also require monies be placed into a reserve account held by them.
Depending upon the time of the month your loan closes, this
per diem charge may vary from a full month's interest to that of a few days. If your loan closes at the end of the month you will have to pay interest only for a day or so.
Taxes and Hazard Insurance:
You may be required to reimburse the seller for property taxes depending upon the month in which you close. You will also need to pay a year's hazard insurance premium up front. Also, you might be required to put a certain amount for taxes and insurance into a special reserve account held by the lender.
Who pays for the closing costs?
In a sellers market, normally the buyer pays for the closings cost, but because we're in a buyers market... the seller or banks, will pay between 2%-3% of the sales price.
The Settlement Statement (HUD 1) is a form that you sign at escrow before receiving the keys to your new home. Here is what it looks like. Normlly, the buyer pays for the following costs on the Settlement Statement (HUD 1) form... section, 800, 900, 1000, 1100, and 1200.