The cost of a home is just the start. There are several closing costs that you need to know about so that you are not surprised when you get to the closing table.
1. Down Payment – Most buyers know and are expecting the first cost, the down payment. The down payment is the initial money you are investing in your home. It is typically 3.5% – 25% of the purchase price of the home. How much you put down determines the type of loan (financing), and if you will be paying private mortgage insurance.
2. Bank (Loan) Origination Fees – Loan origination is simply the creation of a mortgage. The fees are typically broken down into mortgage points, which are expressed as a percentage of the loan amount. So if the loan amount is $100,000, and you see a $1,000 loan origination fee on the paperwork, the bank or broker is charging you one (1) mortgage point. The fees may also be broken down into an origination fee, processing fee and underwriting fee. Talk to your mortgage broker about how much they are charging you to write your loan.
3. Appraisal – This is paid to the appraisal company to confirm the fair market value of the home. They aren’t usually more than $450.
4. Title Company – This fee is paid to the title company for doing a thorough search of the property’s records. The title company researches the deed to your new home, ensuring that no one else has a claim to the property. ASK ABOUT THIS PRICE. The price varies greatly depending on what company you use. It can be as much as $3,000.
5. Homeowners Insurance – Your first year’s insurance is often paid at closing. This covers possible damages to your home. Call different insurance agencies to get quotes. The average is $950.
6. Attorney Fees – After acceptance of a contract, your attorney will review the contract, send inspection item requests, and ensure the overall process runs smoothly. Attorney fees range in price, so be sure to ask what they charge. Pricing varies between $450 – $700.
7. Recording Fees – A fee charged by your local recording office, usually city or county, for the recording of public land records. On average, it’s $150, but can vary based on the city.
8. Credit Report – Your lender will pull your credit report for you. Be sure that you aren’t making any other big purchases or opening new credit cards. This shouldn’t be more than $50.
9. Transfer Tax Stamps – When a home is transferred from a seller to a new buyer, there is a tax involved. To see if your town has a transfer tax, click here.
10. Interest – From the day of closing until the end of the month, that interest gets paid up front. Let’s say you close on the 15th of the month. You will need to pay 15 days’ worth of interest at closing. (assuming a 30 day month)
11. Taxes – If your loan is not a conventional loan (Less than 20% down payment), the bank will require you to escrow your taxes. The escrow the amount will depend on when the next tax bill is due. Let’s say your taxes are $6000 per year, you close December 31 and your next tax bill is due in March. The bank will require: three months of taxes ($1,500), a two month buffer ($1,000), and two months of home owners insurance. If the tax bill is due in April, it would be four months of taxes ($2,000), a two month buffer ($1,000), and two months of homeowners insurance.
If you have any questions or are looking for a realtor to help guide you through the process, I’d love to help you!
Katie Barreto, Re/Max Signature Homes, 630.310.9449