What It REALLY Costs to Get a Mortgage
Recently, I have had a few clients be shocked at closing cost quotes I have given them. On each, I went back and checked my numbers very carefully and, yes, the quotes were right! The client just didn’t realize that there were many costs associated with a home purchase!
No one wants any unpleasant surprises that involve money! So, here is some information on closing costs to help you better prepare for a home purchase.
In addition to a down payment, home buyers should anticipate these possible costs:
An inspector will review the mechanical, electrical, and structural aspects of your home then provide a written report.
Condominium/Home Owners Association-related Fees
These may be required if you purchase a home in a condominium complex.
Well and/or Septic Certifications
If the property has either of these systems, a buyer will want professional testing to ensure they function properly.
A qualified professional inspects the property, looking for termites and other pests and pest damage then submits a report.
These costs are common in a purchase transaction:
This fee covers the cost of a three bureau credit report which shows each borrowers’ credit history. The borrowers will be provided a copy of their credit report.
An appraisal is a professional opinion about the value of your home, prepared for the lender. The appraisal is usually paid for up-front by the borrower. And, in a few cases, more than one appraisal may be required. Buyers receive a copy of the appraisal.
Title and Escrow services, such as title search and insurance, so buyer and lender are sure that no one else has any lien, claim, or encumbrance on the property; recording the Deed and mortgage with the County Recorder; Notary for signing services; and, preparing documents necessary to close a real estate transaction.
Lender’s Origination Services
For services involved in the creation of a mortgage loan, such as loan processing and the underwriting of the loan.
Payable to the County. The amount collected depends upon the month of the year the property sale closes.
Lenders typically require the first year of fire and hazard insurance be paid up front. Flood insurance will be required if the house is in a flood hazard area.
Impounds (also call Reserves)
Prepayments of funds, held in an account, to cover annual charges for homeowner’s insurance and property taxes which will be paid by the lender on the borrower’s behalf. Sums will be added to the impound account each month from the monthly mortgage payment.
Prorated Mortgage Interest
Depending upon the time of month a loan closes, this per diem charge may vary from a full month’s interest to a few days interest. Future interest payments will be made through the monthly loan payment.
Supplemental Property Taxes
The buyer will be billed by the County for these, by mail, after the sale closes. Supplemental taxes that are assessed due to a change in ownership.
The amount of closing costs varies, depending upon the amount of the mortgage and type of loan (i. e., VA, FHA, USDA or Conventional). A mortgage professional can provide an estimate of costs when a potential buyer completes the prequalification process.
What if you don’t have enough money for closing costs? Consider a gift from a family member or participating in a down payment assistance program.