Closing costs can often
add up when you have taken out a mortgage. By knowing
what closing costs and fees will apply, you will be
prepared for closing and owning your home. Closing costs
include things such as real estate transactions, attorney
fees, appraisals, credit reports, prepaid interest,
homeowner’s insurance, title insurance and reserves
that the lender collects for future taxes and insurance.
Each of these different aspects of closing costs can
add up when you have made all of the payments towards
your home or loan that you think is necessary. It is
estimated that closing costs will be an average of $3,000
to $4,000, depending on the types of inspections, insurance
and documentation that needs to be prepared and finished
before you can own your own home.
The first fee which will be a part of closing costs
is the appraisal. This will give you an estimate of
how much your home is worth at the time of closing.
It includes giving you information and documentation
on what will be the highest and best use for your property.
These usually cost an estimated $200-$450, depending
on the area in which you live and the value of real
estate at that time. A second type of fee is the commitment
fee. These fees are charged by investors or lenders
have committed to your loan. A third documentation fee
is the application fee. This is taken at the time of
closing if your loan closes.
Another type of fee to keep in mind with the closing
costs is attorney fees. Attorneys are used for the loan
closing of the mortgage and usually review all of the
documentation available for the closing costs. Another
cost will be for a broker. This will be for the administrative,
processing and transaction fees that take place between
the broker and mortgagee. If document preparation is
performed by a third party, other than the broker, there
will be another charge for this. This may include documentation
such as deed of trust, warranty deed, housing authority
addendum, release of trust and power of attorney. It
may also include other closing loan contracts or documentation
such as processing costs. There is also a closing fee
which is charged. If the closing fee is closed by a
third person, such as a real estate person, there may
be a customary cost.
Other costs will come from inspection of the home and
insurance. The most common type of insurance that you
will need is home owners insurance. This type of insurance
is required to get at least one year in advance to protect
the assets in your home as well as your home. Title
insurance is also required to buy once your home is
off of the mortgage. This will insure a lender of any
liens on the property. Loans will not be closed until
inspections are made and this type of inspection and
insurance is resolved. Another possible type of insurance
is those used for a flood plan. If you are living in
a flood zone, you must pay for flood insurance at the
time of the loan closing. There is also a possibility
of getting a flood certification. This will allow you
to continue have flood zone status during and after
the mortgage. It will be paid at the time of closing.
Another type of insurance is hazard insurance premium
which will be added in closing costs. There are also
inspection fees at the time of closing. This includes
a home inspection service fee, which usually is around
$300. Pest inspection may also be a separate fee which
is included in the closing costs. A third type of inspection
that may be included is a well and septic fee, if this
is part of your home.
Another kind of cost which will be added during closing
costs includes property taxes and assessments. The most
well known deposit for taxes is known as an escrow.
This is set up so that your taxes will continue to be
paid after the loan and begin with a deposit at the
time of closing. Transfer taxes are the other type of
taxes available at the time of closing.
When looking into closing your mortgage, it is important
to find the lowest fees and best way to get the documentation
without having too much hassle. There are several ways
to get free quotes and to find the proper tools in order
to keep closing costs down and make the process of owning
your own home as simple as possible.
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