Closing costs are the fees that are not included in your monthly mortgage payment and reduce the amount of money you have available to spend on a new home. When figuring out how much house you can afford, it is important to look at not just how much you need to pay each month to get financing, but also how much it will cost you in additional expenses to close the purchase.
A real estate lawyer is required as part of the offer and acceptance process, as well as for all transactions that involve land.
The following is a list of what closing costs typically include:
Down Payments — Down payments are usually required on most home mortgages by the lender and can range from a few hundred dollars to tens of thousands of dollars. The more money you put down on your house, the less you are borrowing from the lender. Lenders are more willing to offer to finance for higher-priced homes when a large down payment is provided by the borrower.
Property Taxes — Most lenders require that any property taxes that have been assessed be included in your closing costs. Your home’s purchase price will determine how much your monthly mortgage payment will be, and you will typically have to pay your property taxes out of this amount each month. Property taxes are usually higher in the spring after a new assessment is provided by the county or city. The lender will look at the recent property tax assessment and charge you for it as part of your closing costs.
Title Company Fees — There are several different fees that a title company will charge a borrower. Title insurance protects the lender from any possible losses due to a problem with the ownership documents of the property. Title companies provide an official copy of the entire chain of ownership known as “Title.” A real estate lawyer will explain the legal structure of all the fees.
Survey Fee — This fee is charged for researching and providing a survey of the property that you are buying. A survey shows where the property boundaries lay and any obstacles or buildings that might be in your way of building additions to the house, such as other houses or trees causing shadows.
Recording Fee — This fee is paid to record all documents into your county records office so that anyone looking up property documents can find them.
Document Preparation Fee — This fee covers the labor and material costs that go into the preparation of all the settlement papers and records that must be filed with your local government to notify them that you have taken out a mortgage.
Appraisal Fee — When there is a lot of work going into buying a property, such as multiple offers, the lender will often request that an appraisal be done on the property. An appraiser goes to the property and determines its value based upon what similar homes in the area are selling for. This is part of your closing costs because it protects the bank; they want to make sure that you are not borrowing more than the house is worth before they lend you the money.
Processing Fees — There are several fees associated with processing the loan through the lender’s processing department. These fees include charges for loan origination, underwriting, document preparation, and postage. Your closing costs will be increased by the cost of your lender processing all of these details to get you a mortgage.
Conclusion :
Closing costs can be a major factor in the cost of purchasing your new home. While they vary from state to country, typically closing costs are comprised of loan origination fees, title search and recording charges, appraisal fee, homeowners insurance premium for one year (if not covered by the lender), property taxes for one year if an escrow account is used or contract states that buyer will pay them as part-time owner until sold at which point seller pays lump-sum tax bill on behalf of the buyer with funds deposited into escrow account upfront. A real estate lawyer should always be consulted to ensure you understand what’s going on throughout this process so there are no surprises when it comes down to paying these pesky bills!
