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Common Closing Costs for Buyers |
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Tuesday, 03 April 2007 |
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Surprise charges at close of escrow are never fun. When working with me, you will get constant updates on what the closing costs are shaping up as. However, this is a good list of the general items you can expect to see.
The lender must disclose a good faith
estimate of all settlement costs. A check to cover your closing costs
will probably have to be a cashier’s check. The title company or other
entity conducting the closing will tell you the required amount for:
- Downpayment.
- Loan origination fees.
- Points, or loan discount fees you pay to receive a lower interest rate.
- Appraisal fee.
- Credit report.
- Private mortgage insurance premium.
- Insurance escrow for homeowners insurance, if being paid as part of the mortgage.
- Property tax escrow,
if being paid as part of the mortgage. Lenders keep funds for taxes and
insurance in escrow accounts as they are paid with the mortgage, then
pay the insurance or taxes for you.
- Deed recording fees.
- Title insurance policy premiums.
- Survey.
- Inspection fees—building inspection, termites, etc.
- Notary fees.
- Prorations for your share of costs such as utility bills and property taxes.
A Note About Prorations.
Because such costs are usually paid on either a monthly or yearly
basis, you might have to pay a bill for services used by the sellers
before they moved. Proration is a way for the sellers to pay you back
or for you to pay them for bills they may have paid in advance. For
example, the gas company usually sends a bill each month for the gas
used during the previous month. But assume you buy the home on the 6th
of the month. You would owe the gas company for only the days from the
6th to the end for the month. The seller would owe for the first 5
days. The bill would be prorated for the number of days in the month,
and then each person would be responsible for the days of his or her
ownership.
What to Keep From Your Closing
- The Real Estate Settlement
Procedures Act (RESPA) statement. This form, sometimes called a HUD 1
statement, itemizes all the costs associated with the closing. You’ll
need for income tax purposes and when you sell the home.
- The Truth in Lending Statement summarizes the terms of your mortgage loan.
- The mortgage and the
note (two pieces of paper) spell out the legal terms of your mortgage
obligation and the agreed-upon repayment terms.
- The deed transfers ownership of the property to you.
- Affidavits swearing
to various statements by either party. For example, the sellers will
often sign an affidavit stating that they have not incurred any liens
on the property.
- Riders are amendments
to the sales contract that affect your rights. For example, if you buy
a condominium, you may have a rider outline the condo association’s
rules and restrictions.
- Insurance policies provide a record and proof of your coverage.
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