5 things every home buyer should know about closing costs
If you are considering buying real estate, you may have heard about closing costs. Simply, these are the costs of a real estate transaction beyond a home’s purchase price. Closing costs affect both buyers and sellers of real estate in most areas and can even affect those simply refinancing their mortgages or taking out a home equity loan. Here are some common closing costs and why they are necessary.
Lender Fees Accompany Mortgage Loans And Are Based On the Amount Borrowed
Lender fees are the costs that a bank or mortgage broker charges for the loan. These can include an application fee, underwriting fee, points (which are discount fees one can pay for lower rates), escrow fees and settlement fees. Points are percentages of the loan amount. You might be allowed to pay one percent of your principal loan amount to lower your rate a half a percentage point.
Other Closing Costs Help Make Sure That Your Deed Is Good
Other people in the process earn fees. These can include the title insurance agency for reviewing the county records to ensure that the title to your new home is legal and without liens. Liens are “clouds” on the title, such as judgments and unpaid taxes. Most banks require title insurance covering the loan; you can buy a policy protecting you for an additional fee.
Some Costs Go To Third Parties Who Did Work Along The Way
Costs can be unrelated to the loan, such as the expense of a home inspection, which helps you know if there are any structural problems with a house. A similar expense confirms the value of the home through an appraisal. An appraisal lets you and your bank know roughly what the home is worth.
Depending On Where You Live, The Government May Get A Check At The Closing Table
Some states have mortgage taxes, which are recording fees charged at a closing. Others may have transfer taxes, which are fees paid in order to record a deed transfer – whether or not a mortgage is involved. New York, for example, has both transfer and mortgage taxes, and local recording expenses for properties in New York City and other major metropolitan areas.
Other People Who Get Paid For Their Work
Real estate attorneys can represent you or the bank, and they get paid a fee for their work. Your lawyer or the bank will disclose these fees in advance. If you are the seller of a home, you may have real estate broker fees, which are a percentage of your sales price.