What do I need to know about closing costs?
When you are dealing with real estate closing costs upon the purchase of a home, there are several issues that you need to be aware of:
Mortgage application fees:When you apply for a loan to purchase a home, most lenders will charge you a fee (which will not be refunded, even if you are denied the loan or you choose not to accept the loan). This fee may be applied to your final real estate closing costs or may be paid up front.
Points: As stated above, points are pre-paid interest that can result in a lower overall interest rate. There are calculators online as well as those provided by various lenders that can help you figure out how best to use points to your advantage upon the purchase of a home.
Appraisal Fees:In order to determine the market value of a house, an appraisal by an independent inspector must be performed. It is usually the buyer′s responsibility to pay the appraisal fees for this to happen. Bear in mind that the buyer can request a copy of the appraisal from the lender once it is completed.
Inspection fees: Inspection fees are also usually required to be paid by the buyer as part of the real estate closing costs. This ensures that the home is inspected to make sure it is in good condition and to note any issues that may be discovered. Some lenders will cover this fee, so ask before you sign any contracts.
Pre-paid property insurance: During the closing process, many lenders will require you to have homeowner′s insurance before you purchase the home. This insurance coverage is usually the responsibility of the buyer, but some lenders may cover this as well. The fees are often part of the closing costs.
Pro-rata interest: The closing date may not fall on the date that the interest is usually due for a mortgage. In that case, a calculation is made to factor in the extra days in relation to the interest payment. This amount is part of the real estate closing costs as well. There are other fees that may be incorporated into real estate closing costs, including recording fees, survey fees, a brokerage commission, home warranties, and various taxes. All of these should be discussed ahead of time with the lender so that the buyer knows what he or she is responsible for on the day of closing.