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Closing Costs
You will need quite a bit of up front money to close a deal that will make that house yours. There are several types of closing or settlement costs and other up front moneys you should be prepared to pay.
A major cost is the investment of your time. The usual time spent looking is about 4 months. You also spend time trying to find the best mortgage terms and an attorney who can help you with the legal issues of purchasing a home. You will spend less time looking for your new home, a mortgage, and an attorney if you already know what you want in a home, and how much you can afford.
Financial closing costs are paid by the buyer and seller. Usually there are costs that the seller pays and ones that the buyer pays. Minimize closing expenses by negotiating some of the costs as part of the purchase offer. Some fees are set by law and are not negotiable.
Attorneys and real estate agents usually do most of the paperwork involved in the closing. You may be involved in some activities and not others. Do a final inspection before you close on the house. Make sure any repairs you needed done have been made and all items that were to remain in the home are there.
You officially become the owner of the home at closing. It usually involves the attorneys, clerks, real estate agent, you lenders representative, the seller and you. It can take about an hour to sign all the forms and transfer ownership.
Costs and expenses you would have to pay to state and local agencies are called statutory costs. These include transfer taxes, recording fees for the deed, other state and local fees, prorated taxes.
Third party costs are expenses paid to others such as inspectors or insurance firms. These includes attorney fees, title search costs, home owners insurance and real estate agents commission.
Finance and lenders charges would be application fee, credit report fee, points, lenders attorney fees, document preparation fees, preparation of amortization schedule, land survey, appraisals, lenders mortgage insurance, lenders title insurance, release fees, inspections required by the lender, prepaid interest, and escrow account.
The major portion of the other up front expenses is the deposit or earnest money you make at the time of the purchase offer and the remaining cash down payment you make at closing. In addition to the deposit and down payment, other up front fees are inspections, owners title insurance, appraisal fees, money to the seller, moving expenses, escrow account funds.
Depending on the purchase offer contract contingency clauses, you might have expenses immediately after moving in.
The Real Estate Settlement Procedures Act contains information on the closing costs that you will probably have to pay. Within 3 days after you apply for a mortgage, you lender should provided you with a good faith estimate of settlement costs. This estimate should give you a good idea of how much cash you will need at closing to cover prorated taxes, first months interest and other costs. This act also requires lenders to give you a booklet called Settlement Costs and You. It tells how to negotiate a sales contract, how to work with other professionals and your responsibilities as a home buyer.
Since closing costs can be high, it pays to shop around and negotiate with the seller, your lender, and your attorney. The less you have to pay at closing the more you can invest in the down payment of your home, thereby reducing your mortgage costs.
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