In addition to
the down payment, monthly payment, real estate
tax, home owners insurance, and possible
PMI,
there are also one-time closing costs that can
add up to a considerable amount by the time you
finish negotiating your mortgage deal. That
translates to between $3,000 and $6,000 on a
$100,000 home. Sometimes you can get these costs
waived or reduced, but expect to pay a higher
interest rate for a mortgage with little or no
closing costs. Be sure to have enough to cover
these additional costs, which typically amount
to between 2 and 5 percent of the home's
purchase price.
Good Faith
Estimate
The closing
costs are outlined in a good faith estimate. By
law, lenders are required to give you an
estimate of these costs within three business
days of your application. It will list expenses
related to inspections, taxes, title insurance
and a host of other charges (outlined below). In
addition, you should also receive an information
booklet, "Settlement Costs - a HUD Guide".
Obtain a good faith estimate from each lender to
save time and to use as a comparison when
shopping between different lenders.
Here is a list
of some major closing costs:
-
Loan-application fees and credit report
-
Escrow Fees
-
Property
appraisal
-
Title
insurance
-
Property
taxes
-
Attorney
fees
-
Survey
-
Points and
Origination Fees
-
Prepaid
loan interest
-
Recording
fees
-
Transfer
taxes
-
Recording
fees
-
Mailing/courier/notary fees
Title Insurance
Title insurance
protects you and the lender against the risk
that the house you are purchasing is not legally
owned by the seller. It checks for any defects,
liens or encumbrances in the property title that
may affect the rights of ownership, possession
or use of the property. Separate title
insurances must be issued for both the lender
and yourself. Owner's title insurance is
optional, but lender title insurance is included
in the closing costs. Depending on your home's
purchase price, this insurance can cost between
several hundred and several thousand dollars.
Escrow Fees
These costs
cover the additional costs associated with
buying a home, such as private mortgage
insurance (PMI), homeowner's insurance and
property taxes. This insures that taxes and
insurance fees are paid on time. Escrow fees can
range from several hundred to several thousand
dollars depending on the purchase price of the
home. Some lenders may be willing to waive
escrow fees in exchange for charging you a
higher interest rate or more points. Beware of
additional charges that may not seem familiar.
Cost saving tips
-
Negotiate
with the seller of the property to help pay
for some of the closing costs or other fees.
-
A real
estate attorney is required to represent you
with the seller. An attorney is also
required to close the mortgage when dealing
with the lender. By choosing one attorney
that can perform both duties, you may be
able to save hundreds of dollars.
-
Additionally, you may also be able to save
money if you try to close on or near the end
of the month. Because all
mortgage loans are
due on the first of the month, you pay
interest from the day you close until the
end of the month. By closing at the end of
the month, you can reduce the amount of
interest you have to pay.
Mortgage Glossary7
