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What Closing Costs Should I Expect When Buying a Home?

Wednesday, March 23, 2016 - Article by: MEL SMITH--LENDER OF THE MONTH - Meadowbrook Financial Mortgage Bankers - Message

Purchasing a home can be confusing, especially for first-time buyers who have never been through the process. One normally misinterpreted area is closing costs. Many buyers do not know what to expect or how much they will have to pay. Here are some important pieces of info that can assist you to prepare.

What is Included in Closing Costs?Closing costs contain all of the expenses and fees related with buying a home. The lender or other third parties may charge them for services rendered. This listing outlines some of the most typical costs and when they are due.

  • Mortgage application fees or loan origination fees: The lender charges this fee to process the loan application. It can be paid prior to or at closing by the buyer.
  • Inspection fee: This is the cost of the home inspection charged by a licensed inspector. It may include special inspections, such as for pests or termites.
  • Appraisal fees: Typically charged by the appraiser to determine the value of the home, these fees are paid by the buyer.
  • Fees for survey, title search, and recording fees: These are paid by either the seller or buyer and at closing.
  • Brokerage commission: Paid to the real estate brokers by the seller at closing.
  • Home warranty: Typically paid at closing, this fee is covered by the buyer, but may be included in the contract as the seller's or Realtor's responsibility.
  • Property insurance: Paid by the buyer to insure the property, this may be paid to the insurance company prior to closing or included in the closing transaction.
  • Property taxes: This amount must be estimated to determine how much the buyer and seller must pay for the prorated portions of the tax year.
  • Points: This amount is charged to moderate the interest rate through the life of the loan. One point is equal to one percent of the loan amount

Buyers need to know how much all of these fees and expenses will cost. While the amounts can fluctuate widely, you can usually expect to pay between two and five percent of the purchase price.Utilize the listing above before closing will assist you in the process.

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