What are Closing Costs?

Now that you have successfully purchased your new home and plans to move in, what next?

Without a doubt, the last step in the journey to owning a home is closing. Also known as the settlement, this stage entails handing over the home from the seller to the buyer. It is giving the buyer A KEY TO THEIR DREAM HOME! Both the buyer and the seller sign pile of documents. Thereafter, the seller will present a sizable deposit check along with the various closing costs. At this stage, many buyers deposit thousands of dollars without knowing what the closing costs are catering for.

Buyers must know the expected closing costs, some of which are both government-imposed and mortgage-related, prior to purchasing the home. Some of the common closing costs you are likely to incur include:

1. Appraisal Fee

Commonly paid at the beginning of the loan application process, this is the fee you pay for the appraisal of the home. Appraisal fee provides a loan guarantee, protects you from overbuying, and ensures accurate home estimates.

2. Loan Origination Fee

In most cases, the loan origination fee is 1% of the mortgage and cater for loan-processing costs.

3. Credit Report Fee

Before you are approved to get a loan, lenders must ascertain if you have a good credit score. The credit report fee covers the costs of requesting a credit report.

4. Title Insurance Fees

Title insurance fees cater for costs of title search, title insurance, title examination, document preparation among miscellaneous costs that may be incurred to get a title.

5. Loan Discount

This is a one-time fee you pay to lower your interest rate. The buyer purchases points – a point is equivalent to the percent of the mortgage.

6. Prepaid Interest Fee

This fee is paid to cover the interest payment until you make your first installment. It is higher when you purchase a home at the end of the month.

7. PMI Premium

PMI premium is a fee for mortgage insurance to protects the lender against foreclosure losses. Once the buyer has 20% equity in the home, they can apply to eliminate this closing cost.

8. Escrow Accounts

If you contract an escrow, the lender will open an account to hold the funds for home insurance and future annual property taxes. This fee also covers taxes of up to two months above the months that have elapsed.

9. Transfer Taxes and Recording Fees

These fees are paid to state agencies responsible for recording home purchase documents and transferring ownership.

Deluxive Homes

Since these closing costs vary from one location to another, feel free to contact Deluxive Homes and find out which fees you will incur. We also advise you to negotiate with the seller during the offering stage. Some sellers may agree to settle some of the costs.

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