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Home Buying - Closing Costs
Most people buying a home have heard all about the closing of the mortgage loan and the horror stories of the process. It is true that closing on a loan can be a bit overwhelming and it does require some time, but when it is all over, you are the owner of a home! Closing costs consist of many different things.

To start with, when it comes to the down payment, which is often considered a part of the closing costs, typically a lender will require 10% down although there are special programs that accept 3% to 5%. Aditionally, on occasion, some loans to finance 100% of the home’s value can be found but keep in mind that to get this type of loan, you need excellent credit and you will be required to get a PMI.

The loan origination fee is the amount of money you pay for the lender to handle your loan. The government has strict guidelines in that only 1% can be charged for an origination fee on FHA or VA loans. If you are securing a conventional loan, the fees will vary anywhere from minus one to three plus points as well as other applicable costs. Keep in mind that one point is equal to 1% of the loan.

Another part of the closing cost is the appraisal fee. This is the money needed to obtain an estimate of the market value where the home is located. This figure is what the lender will base the loan amount on. Typically, this fee is between $300 and $500, which is non-refundable. A credit report will also need to be run so the lender knows you have the appropriate credit to handle the loan. The cost for this report is usually around $50, which is also non-refundable.

Tax Service Fee.A charge of approximately $75 is made by a tax service company to verify to the lender that the taxes have actually been paid when due or are due to be paid by borrower or mortgage company if impounding.
  • Assumption Fee - Fee of approximately $250 up to 1% of the loan balance is charged by the existing lender for the privilege of assuming the existing loan.

  • Pest Inspection Fee - Fees of $75 - $175 is charged by termite companies for inspecting property for damage done by wood destroying organisms and dryrot..It is customary for the seller to pay for Section 1 and the buyer for Section 2 work.

  • Other Inspection Fees - Other inspections the buyer may choose to have done are: property inspections that usually cover foundation, electrical, plumbing and overall construction at a cost of $300-$400. Roof inspections cost $75-$125. Geological reports cover subject's site in relation to fault and slide zones, costing about $100..Septic $200-$400. Radon $50-$100. Asbestos $75-$125.

  • Alta Title Insurance - This is an extended policy with more specific coverage than the CLTA standard policy..It covers unrecorded liens, is based on loan amount only and is required by almost all lenders. The cost is obtained from a rate chart and is based on the loan amount.

  • City Transfer Tax - A municipal tax imposed within the corporate limits of some cities..The cost is $3.30 per $1,000 of selling price, usually negotiable between buyer and seller, but custom varies between countries..The VA does not allow the veteran buyer to pay any portion of this cost.

  • Miscellaneous Costs & Fees - An estimate of $150 should be adequate to cover minor items as notary, recording documents, endorsements, etc. as well as allowing for variations from these other estimates.

  • Hazard Insurance Reserve - Two month's premium is collected for the impound account if required..The buyer will need to either provide or pay for coverage for the 1st year.

  • Prepaid Interest - Interest must be paid from COE (close of escrow) to 30 days prior to the first regular mortgage payment. An estimate of one months interest should suffice.

  • Mortgage Insurance - Mortgage Insurance is required on all conventional loans greater than 80%..The cost may range from 1/2% to 1% per year and 14 months premium is.collected in advance. This is coverage for the lender in case of default.

  • Tax Impounds - If the new loan is going to have an impound account, the lender will require from 2-10 months taxes to be deposited, depending on the time of year. Note: if taxes are prorated, buyer's total charge for taxes should equal about six month's taxes.

  • Escrow Fee - These fees range from $750-$2500, depending on the sales price. In some counties its customarily paid by the seller, in other counties the buyer pays, while in others it may be customarily split. Remember though, everything is negotiable.

  • Negotiating Fees - The above fees are typical costs when buying real estate in California counties..Most of the fees are considered buyer's non-recurring closing costs..Some of the fees are fixed while others are negotiable..Your real estate agent can negotiate with the sellers to pay some or most of these costs, saving you thousands of dollars in closing costs..Ask your real estate agent and loan agent to provide estimated closing costs of buying a home before looking at homes.

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