Common Closing Costs for Buyers
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 five 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.
Reprinted from REALTOR® Magazine Online by permission of the NATIONAL ASSOCIATION OF REALTORS®
Copyright 2005. All rights reserved. www.REALTOR.org/realtormag
9 Tips for Homebuyers - Be picky, but don’t be unrealistic. There is no perfect home.
- Do your homework before you start looking. Decide specifically what features you want in a home and which are most important to you.
- Get your finances in order. Review your credit report and be sure you have enough money to cover your downpayment and your closing costs.
- Don’t wait to arrange financing. Talk to a lender and get prequalified for a mortgage before you start looking.
- Don’t ask too many people for opinions. It will drive you crazy. Select one or two people to turn to if you feel you need a second opinion.
- Decide when you could move. When is your lease up? Are you allowed to sublet? How tight is the rental market in your area?
- Think long-term. Are you looking for a starter house with the idea of moving up in a few years or do you hope to stay in this home longer? This decision may dictate what type of home you’ll buy as well as the type of mortgage terms that suit you best.
- Don’t be naïve. Insist on a home inspection and, if possible, get a warranty from the seller to cover defects within one year.
- Get help. Consider hiring a REALTOR® as a buyer’s representative. Unlike a listing agent, whose first duty is to the seller, a buyer’s representative is working only for you. And often, buyer’s reps are paid out of the seller’s commission payment.
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