"The amount of your down payment depends on your loan type and what your lender will require of you".
What Are My Closing Costs?
Closing costs are essentially the price of buying a home. They are made up of various fees charged by your lender and title company that you will pay when you close on your home. These fees vary from one transaction to another and are detailed on your settlement statement you receive from your title company the day of closing. Your Realtor® will receive a preliminary copy of your settlement statement before your closing date to make sure you are charged appropriately according to contract agreement. On top of your down payment required by your lender, you should plan on setting an extra 4% of the purchase price aside to cover your closing costs. This will help cover any surprises or changes that arise at the last minute. The day before closing, you will be notified by the title company, lender or real estate agent the amount of money you will need to bring to closing, and this is usually in the form of a cashier’s check made out the title company. Below is a quick look at some common closing costs buyers can incur.
Down Payment The amount of your down payment depends on your type of loan and what your lender will require of you. This amount will come directly from your lender.
Loan Origination /Processing Fees These are charges by your lender for your loan. These fees vary from lender to lender, so you will need to ask your lender upfront what they charge for doing business.
"Closing costs are essentially the price of buying a home".
Points One point is equal to 1% of your loan. You can pay added points to help reduce your interest rate. Again, this is something you need to discuss with your lender.
Appraisal Fee, Credit Report, PMI Premium Your lender will require you to pay for an appraisal, credit report and Private Mortgage Insurance. This helps to insure they are making a sound investment. Some lenders tie these costs into your settlement statement or they may require you to pay them upfront.
Home Owners Insurance Your lender will require you to have a home owners insurance policy lined up for closing. Again, this is another step lenders take to protect their investment.
Real Estate Taxes You can request your lender to set up escrow for real estate taxes. It’s like setting up a savings account specifically for paying your taxes. Your lender can add this to your monthly loan payment and then pay your real estate taxes from your escrow account at the end of the year. Most home owners set up escrow for taxes to avoid paying a large tax bill at the end of the year.
Deed Recording Fees These are charged by your title company for recording the sale with the city or county.
Title Insurance Policy Premium This is a one-time fee charged by your title company. Your title company will do a records search to check for liens or encumbrances on the title. Title insurance protects the buyer and title company in case any issues of right of ownership arise later.
Survey The title company may require a survey be completed on the property. The survey checks for overlapping boundary lines or encroachments on the property which can affect the title’s insurability.
Inspection Fees Any inspection fees you don’t pay for upfront at the time the work was completed, will be charged to you on your settlement statement.
Prorations These are your share of possible utility bills and taxes that were paid in advance by the seller. The bills are prorated according to how many days both buyer and seller are responsible for their portion of days of ownership.
Keep in mind these are some of the most common closing costs a buyer may incur. Each transaction is unique and will vary from one to another, but this is a good preview of the closing costs you can expect to pay. ■