Closing Cost

Closing costs are fees and taxes associated with purchasing and taking ownership of a home. Depending on where you live and the complexity of your transaction, they can easily add up to thousands of dollars. They're generally around 3% to 6% of the purchase price of the home.
Lender is required to give you a written, good-faith estimate(GFE) of all your closing costs within three days of your applying for a loan.

Points or loan origination fees. Sometimes called “origination points” this a fee you will pay to the person arranging your new loan. This person could be a mortgage company or broker. A reasonable amount to pay for loan origination is one percent of your loan amount however, it is not uncommon for mortgage brokers to charge as much as five percent. Find a broker who is willing to work for one percent without padding your mortgage rate for a commission. Read this article to fully understand Mortgage broker Mark Up

Discount Points. There is another flavor of mortgage points you need to be aware of and that is the so called “discount points.” This is a form of pre-paid interest paid by you at closing in exchange for lowering your mortgage rate. One “discount” point is the equivalent of one percent of your mortgage amount and should lower your mortgage rate by .25%. Some lenders will require you to pay points to get a specific mortgage rate however, in today’s market you can get rock bottom mortgage rates without paying discount points.

Escrow fees. These are the fees that are charged to process all of the paperwork and keep the money in a safe place while you and the seller dicker over things. Depending on the cost of your home, this can amount to a few hundred to a couple of thousand dollars.

Homeowner's insurance. We discuss this in detail elsewhere. For now, though, know that you should expect to pay between $500-$2,000 depending on the value of your home and your coverage. You must get this insurance before your lender will release the funds for your house.

Title insurance. What would happen if, six months after you move into your new house, you discover that the person who sold you the house didn't really own it? While it's a remote possibility, it does occasionally happen. Luckily, there's protection against this very problem. Your lender will want you to get "title insurance" to take care of this situation should it arise. Based on the value of your home, expect to pay between $500-$2,000.

Property taxes. Depending on when your purchase actually closes, you may owe the previous owners for taxes that they've already paid. For example, say the old owners paid their taxes from January through June. You buy the house in April. Well, they've already paid for your taxes for May and June. You need to reimburse them for this expense. In addition you may need to prepay some taxes.

Legal fees. You may not need a lawyer. Ask your buyer broker if she feels that the transaction is complicated enough to hire one. Frequently, home transactions just use boilerplate forms for everything. If this is the case, you will save money.

Private mortgage insurance. (PMI) is extra insurance that lenders require from most homebuyers who obtain loans that are more than 80 percent of home's value. In other words, buyers with less than a 20 percent down payment are normally required to pay PMI.

Notary. Yes, someone has to swear that you are who you say you are. Expect to pay about $50 for the privilege.

Document prep fees.Lender and/or broker fees.

Appraisal fees. To give your home a fair market value.

Factual credit report fee. A verified credit report.

Tax service fees. To ensure your taxes are paid each year.

Survey fee. This may be waived sometimes if an existing survey can be used.

State recording fees. As your state requires.Money paid to the lender for recording a home sale with the local authorities, thereby making it part of the public records.

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