Clarification of closing cost when buying Real Estate.
Note: These amounts are paid at the time of loan application and are not refundable.
Realty Transfer Taxes – 2% of the purchase price is paid to local and state governments and is usually split: 1% by the seller and 1% by buyer.
Appraisal Fee – An amount charged to determine the value and marketability of property. Usually required if bank financed.
Credit Report – A fee paid to your lender to check your credit.
Survey – An estimate of the cost to survey the property, fee will vary with size of property, surveyor employed and type of survey desired.
Title Search – A fee to search public records to determine if property has any recorded liens.
Title Insurance – An insurance policy to insure the owner or mortgagee against loss by reason of title defects except those excluded by the policy. Required by lenders.
Preparation of papers – Fees charged (may be several) to do things such as notary work, deed, mortgage and note preparation.
Settlement Fee – An amount paid to the closer of the transaction, may be a lawyer, abstractor, title company or lenders’ representative.
Points or Mortgage Fee – A fee paid to the mortgage lender, also called “service fee”, “placement charges” or “origination fee” – a point is 1%.
Municipal Letters – A sum paid to obtain letters from municipal authorities stating no unrecorded liens are pending for water, sewage or government improvements.
Inspection Report – Fees paid to inspect the property, such as pest, well, septic, radon or whole house inspections depending on what the buyer and seller agree to perform.
Hand Money – A sum paid by a buyer as a deposit for a sale, also called earnest money. This money must be deposited into the broker’s escrow account.
– Property Taxes – The lender pays your property taxes and requires you to make an initial deposit into escrow to cover taxes when due. Usually 8 months of taxes.
– Insurance – You must obtain property insurance before the closing and take the policy with you to the closing.
– Interest – The first mortgage payment is due at least one month after closing. Interim interest is paid at closing.
– Mortgage Insurance – May be FHA or private mortgage insurance, required to cover risk when purchasing with less than 20% cash downpayment.
Proration of Taxes and other items – A division of financial responsibility between the buyer and the seller for such things as taxes, utilities etc. that may be owed but not yet billed or for items paid in advance such as a years taxes.
Remember – Estimates can not be 100% accurate and the figure will vary with loan type, lender, and companies hired to provide service. Other costs may incur that are not listed above.