Buyers Closing Costs

There are certain typical expenses associated with closing the sale of a home. These expenses are determined by many factors.  Lenders fees may vary with each lender.  Buyers and sellers negotiate buyers' closing expenses as spelled out in the sales contract.  It is normal in our market for sellers to pay a portion or all of buyers' closing expenses if the purchase price is equal to the list price or the seller is eager to sell. 

Good Faith Estimate

Buyers should receive an Estimate (previously called a GFE) of closing costs at the time the loan application is submitted to the lender. The estimate is based on the loan officer's past experience and may not include all the closing costs. I will be glad to review the "Estimate," answering questions and highlighting missing costs and estimates I believe to be low. There may be some fees that I will have a better handle on the exact amount rather than a safe and higher amount estimated by a lender to safely cover them.  The chart below will show some items included in the Estimate but are not all that may be included.  We can further detail those at our first meeting to be sure that you are prepared and ready to proceed to look at homes.

Buyers Typical Closing Costs

Loan-Related Costs

  • Loan Origination Fee- This covers the administrative expenses in setting yo and processing the loan.  The loan origination fee may be a percentage of the mortgage amount.
  • Points (optional and not typical)- An option for the home buyer is to pay points to lower the interest rate at which the loan will be repaid.  Each point equals 1 percent of the mortgage amount.  For example: on a $150,000 loan, 1 point would equal $1,500.
  • Appraisal Fee- The fee for having the house appraised may be incorporated into the closing costs or payment may be required by the lender at the time the loan application is submitted.
  • Credit Report- The lender uses a credit report to determine the creditworthiness of the loan applicant.  This fee is often paid when the loan application is submitted.
  • Interim Interest Payment- Typically the buyer is required to pay interest on the mortgage loan to cover the time between the closing date and when the first mortgage payment period beings.  For example: If closing is on May 15. Your first monthly payment begins to accrue interest on June 1 with your first mortgage payment due July 1. At closing an interest payment covering the accrual period between May 15 and May 31 may be required.
  • Escrow Account - for Taxes and Insurance - At closing a payment may be required to fund the escrow account if the lender is paying home insurance, property taxes, and/or other expenses out of the escrow account.

Taxes

  • Property Taxes- Property taxes are based upon the tax assessed value.  It typically depends on whether the home is in the city, town, village, or county.  There are times when in the county that the VFD (Volunteer Fire Department) amount is added to the amount for that county.
  • Recording Fees- the amount will be determined by the number of pages that need recording.  For example: typically you have the deed and deed of trust that must be recorded however if a person has POA (Power of Attorney) to sign for the other party, that POA needs to be recorded if it has not been already.

Insurance

  • Homeowners Insurance-This insurance covers replacement costs for damages caused by fire, wind or other disaster that might affect the value of the property.  Typically, the insurance also includes personal liability and theft coverage.  Each policy can vary so be sure to discuss this with the insurance company of your choice. If you need assistance in choosing a company, feel free to let me know and I can provide you with the names of local insurance companies for your consideration.
  • Flood Insurance- Additional hazard insurance coverage that is required for homes located in a designated hazard zone as established by the Federal Emergency Management Agency (FEMA).
  • Private Mortgage Insurance (PMI) if required- Insurance required for conventional mortgage loans when the borrower's down payment on the house is less than 20 percent of the loan value. At 22%, lenders are required to remove the PMI but can be removed by you providing an appraisal or acceptable form of value to show 20% already paid.
  • Title Insurance-This policy protects both the buyer and lender by insuring a clear chain of title.  (In other words, it insures that the person who sells the house has the legal right to do so.)  It is a one time charge and is strongly recommended with all purchases...those that are required when lenders are involved as well as cash transactions where there is no controlling entity to mandate it. 

 

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