Buying a home can be complicated, especially for first-time buyers who have never been through the process before. One confusing thing can be the closing costs which is often misunderstood. Many buyers do not have an idea of what to expect and how much they will have to pay. Closing costs are not included in the listed purchase price of real estate, typically, and can be a surprise for most homebuyers. Read the following information that will help through the complete process.
- Closing costs occur when the title of a property is transferred from the seller to the buyer. Closing costs are the expenses, in excess of the cost of the property that helps to complete a real estate transaction. Both sellers and buyers may have to pay the closing costs to the service providers who help to carry out the transaction.
- Costs included may be appraisal fees, legal and lender fees, title searches, title insurance, taxes, surveys, professional fees such as lawyer and inspectors and credit report charges.
- While the amounts vary widely, closing costs for home buyers total around 3% to 5% of the home’s cost which gets added to the total cost of the home. For buyers, sometimes it is possible to get the closing costs added to the mortgage amount and repaid in instalments.
- Prior to closing, you will receive the Closing Disclosure, an important document that provides exact details of the loan and actual closing costs.
- Be wary of the statement: Seller pays closing costs. Read carefully before you sign anything. All costs and accountable parties will be spelt out in the paperwork. The first sections of the Closing Disclosure provide information about the buyer, seller and lender. It lists the property address, closing date and selected settlement company. It also details the type of loan being used for the purchase.
- The h are in the next section. The document provides the amounts due to and from the buyer, with the final amount on the last line.
- The next section lists the amounts due to and from the seller before moving on to the settlement charges. This includes the amount in escrow, title insurance, lender fees and other settlement charges. The loan estimate is compared to the costs listed on the document, making it easy to see where any differences lie.
- The final section provides information on the loan you will receive. This includes the loan amount, interest rate, monthly payments and information about whether this is a fixed or variable-rate loan. Here, you can also find out whether there is a balloon payment or prepayment penalty. Take the time to carefully review this statement with your lender before signing.
Details of closing costs for Buyer’s & Seller’s are shown below
- Inspection fee – The fee charged by a licenced inspector is the to inspect a house is called inspection fee. It may be paid ahead or at the time of the inspection
- Mortgage application fees or loan origination fee – The lender charges the mortgage application fee to process the loan. It may be paid ahead or at closing
- Appraisal fees -Charged by the appraiser to determine the value of the home. This fee is paid by the buyer at the closing
- Fees for a title search, survey, and recording fees. These are paid by either the seller or buyer and at closing
- Brokerage commission: Paid to the real estate brokers by the seller at closing
- Property insurance: Paid by the buyer to insure the property. The property insurance fee may be paid to the insurance company prior to closing or included in the closing transaction
- Property taxes: This amount must be calculated to determine how much the buyer and seller must pay for the prorated portions of the tax year
Preparation and knowledge are critical for a smooth, efficient closing with no unwelcome surprises.