SGI Realty One Real Estate Blog

Closing Costs: What to Expect

There are a number of fees you have to settle before the ownership of property is transferred to you. These are called the closing costs. It is important that you know how much these are so that you can settle them during the closing. You will have an idea of the fees when looking for a lender as lenders will provide you a Good Faith Estimate.

It is crucial that you know how much the costs are so that you can prepare the needed amount. This is also essential because although there are fixed charges, there are also negotiable fees. Most of the time, the buyer is responsible for settling the closing costs. However, the seller may also be held liable depending on what the parties have agreed.

So what are the closing costs you can expect? Here are some of them:

1. Points - This is paid by the buyer to the lender. Such points are equivalent to a percentage of your of your loan amount. 1 point means 1% of the amount your borrowed. Paying more points will lower your interest rate. Paying more points is ideal if you plan to stay in your home for a long time.

2. Attorney fee - This is for the services rendered by the lawyer. Their respective lawyer may represent parties involved in the transaction. He typically prepares the necessary documents for the transaction to ensure that it is correct.

3. Application fee - This is a fee covering the services rendered by the lender for processing the loan application of the buyer. In the past, lenders used to charge this up front. However, this is not applicable today as this now forms part of the closing costs.

4. Property insurance - The buyer usually used this. In some cases, the buyer pays for this and reimbursed by the seller. The lender will normally require that the property be insured throughout the life of the mortgage. He also requires the insurance premium for the first year be paid in advance. This will be a part of the closing cost is the buyer has not paid an insurance company for this purpose yet.

5. Home warranties - Many sellers are including a one-year home insurance. Many sellers have adapted this marketing strategy to attract more buyers.

6. Title search and title insurance - This is paid to the title company who is responsible for examining documents related to the property. It is important to verify that the property has a good title to protect the buyer from any claims in the future. This will also verify if the seller has the authority to sell the property.

7. Appraisal fee - This is for the independent appraiser who will be checking the property to verify its market value. The lender requires this.

There are more fees and charges included in the closing costs. It is essential that you discuss this with your lender ahead of time so that you can prepare the needed amount. Having an agent will also help because he can assist you. He can also help you negotiate some of the fees included in the closing cost.