Post by: Nancy Braun, Showcase Realty 

 

What are closing costs?

Home buying involves a lot of  paperwork, and it can all be confusing especially if you are a first time buyer. There are plenty of misunderstood areas, mostly because it is the first time you have purchased a home.. Among the misunderstood areas are closing costs. 

Closing costs are expenses paid at the closing of a real estate transaction. This happens after the title of the property has been transferred from the seller to you. It can be incurred by both parties, or it can be paid by both parties.

The total amount of closing cost depends on where the property is being sold, the price of the property, and the type of loan you choose.

You as the buyer are expected to pay two to five percent of the purchase price as closing costs. Sellers, however, are expected to pay the commission to the real estate agent. Because it is based on a percentage dependent on the total price of the property, they are big to pay at closing. 

 

What’s included in a buyer’s closing costs?

The following are among the things you may find included in your closing costs.

• Application Fee. This is the fee the lender charges to process the loan application. You can pay this fee ahead of time or at the time of the closing.
• Appraisal Fee. This is the fee paid to the appraisal company or appraiser who assessed the home’s market value. If you requested special inspections for pests or termites, it will be included in this fee. You have the option of paying for this fee ahead of time or at closing.
• Credit report.  Your credit score plays a huge role in determining how much you can be approved for a loan and the interest rate they will charge you. 
• Home inspection. This is the fee to be paid to the home inspector for verifying the condition of the property, and if there are repairs to be made. This fee is usually paid by the buyer.
• Lender’s Policy Title Insurance. This is insurance that is required to get a mortgage loan. It protects the lender against problems with the title of your property. 
• Ownership Policy Title Insurance. This is a policy to protect you in case someone contests your right of ownership to the property. 
• Property Insurance. Of course you will want to insure your investment. This is a fee paid by the buyer to the insurance company at the closing. You will be required to have an insurance binder to close your loan.
• Property Taxes. With your home comes the responsibility of paying property taxes. This will be computed so you and seller can pay for the prorated portions of the tax year, based on when you close on the property. 
• Recording Fees. This is the fee charged by your city or county office, for keeping and updating public land records.
• Title Search Fee. This is paid to the title company for conducting a search of the property’s information. The title company makes sure that no else has a claim to the property. 

These are just some closing costs waiting for you when you purchase a home.  Be sure to go to your mortgage banker or broker and ask them to explain each of these costs and how it applies to your loan. 

Better yet, get a loan estimate form at the onset. This way, you’ll know the costs and where your money will be going, so you will not be surprised with any unexpected closing costs in the end. 

You can also negotiate closing costs with the seller. Instead of getting a price reduction, which will amount to a few dollars more in a monthly payment, ask for the seller to pay for some of the closing costs  of the home. 

Call me, Nancy Braun, at (704) 997-3794. Let me help you enjoy your first time home buying experience.