Buyer Tip: What are Closing Costs and Prepaid Expenses?

By
Real Estate Agent with Cedar Rapids/Iowa City, IA KW Legacy Group S44645
https://activerain.com/droplet/5gNH

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 interest rate with discount points (not much of this as interest rates have been so low)

 

For most loan programs, the maximum for seller credits is up to 3% of the purchase amount.  In the case of FHA loans, the buyer is required to have 3.5% of their own money in the purchase, so we must be aware of the threshold for seller credits.  In Cedar Rapids and Iowa City area, usually about $2500-$3000 will cover the closing costs and most of the pre-paid expenses when purchasing a home.  

 

For specific questions about financing options and costs, I can recommend some great local lenders at any bank in the Corridor.  I would love to help you get into a new home in 2019!

 

Keep smiling!

 

Karen

 

 

 

Posted by

 

Karen Feltman, REALTOR®, ABR, AHS, CHMS,                                                                      CNE,CRS, e-Pro, green, GRI, SRES, TRC

Keller Williams Legacy Group

4850 Armar Drive SE Ste B

Cedar Rapids, Iowa 52403

Email: karenfeltman@gmail.com

Mobile  319-521-0701

www.KarenFeltman.com

Licensed in the State of Iowa

© 2010-2018 by Karen Feltman, Cedar Rapids/Iowa City Relocation Specialist 

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Iowa Linn County Cedar Rapids
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Tags:
closing costs
mortgage information
buyer advice
first time homebuyer
prepaid expenses
buying a home in cedar rapids
karen feltman realtor
buying a home in linn county iowa

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Doug Rogers
Bayou Properties - Alexandria, LA
Your Alexandria Louisiana Agent

I have to remind buyers that a "closing cost dollar" is the same a dollar off the purchase price. When a seller pays closing, the buyer isn't paying full price for the home.

Jan 09, 2019 07:30 AM #1
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Karen Feltman

Relocation Specialist in Cedar Rapids, Iowa
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