What Exactly Does ‘Closing Costs’ Cover?
Buying a house and making it into a home takes time and effort. There are a lot of procedures to be followed, and costs to bear before you can call it home! There are several expenses over and above the price of the property that is quoted, and these expenses are called closing costs. Buyers and sellers normally incur closing costs before a real estate transaction is completed, which typically includes the following.
Fees
Several fees are included under the closing costs –
- Appraisal fee: It is the fee paid to a qualified appraiser to know how much a property is worth.
- Application fee: It refers to the amount paid to process the request raised for a new loan and includes cost related to administrative expenses.
- Origination fee: It is also known as underwriting fee, administrative fee, or processing fee and is charged to evaluate and prepare mortgage loans.
- Assumption fee: It is the fee paid by a buyer who assumes a mortgage on a property that has not been completely paid off.
- Survey fee: It is the amount paid to a surveyor for inspecting a property and determining its size, dimension, and value.
- FHA, USDA, and VA fee: FHA fee is the upfront cost and monthly premium that you pay for a mortgage guaranteed by the Federal Housing Administration. The United States Department of Agriculture or the Department of Veterans Affairs fee is a part of the closing costs.
- Escrow account fees: It includes property taxes, homeowner’s insurance, as well as applicable primary mortgage insurance.
- Discount points: Commonly referred to as ‘buying down the rate’ discount points are also known as discount fees and are paid to the lender to lower the interest rates.
Other fees that are included in closing costs include attorney fee, mortgage broker fee, mortgage insurance fee, real estate commission fees, title transfer fee, as well as a title search fee.
Home inspection cost
Home inspection assesses the condition of the house and reports on whether the property is worth the cost, or whether the buyer will incur an additional cost in repairs that may damage their financial standing. It also accesses whether the house is safe to live-in and gives the buyer leverage to negotiate the sale price.
Title insurance
There are two types of title insurance, owner’s insurance, and the lender’s insurance that are associated with closing costs. The title insurance can be paid by the buyer, seller, or both. Every state (or county) has different rules that govern this aspect, and it can also be negotiated in your purchase and sales agreement who pays for the title insurance.
Prepaid interest
Prepaid interest is the amount that the debtor pays before that first scheduled mortgage payment. It is the interest that is accrued on mortgage loan between the settlement date and the date of the first monthly payment. The interest incurred during this period is paid by the buyer to the lender.
Other expenses that are covered under the closing costs include the cost incurred to run a full credit report on the buyer before the terms of the mortgage loan are offered.
fltitleclosings.com can provide you proper guidelines while dealing with closing costs and title insurance services.
