As a new home buyer, you may be required to pay some or all of the fees associated with the home buying process. It’s a good idea to be prepared and have an idea of what you can expect. Closing costs vary depending on the location, type of property, and loan chosen. For now, we’ll focus on the most typical closing costs that buyer encounter.
💲 What closing fees can I expect?
The application fee covers the cost for the lender to process the mortgage application. Application fees may include a credit check or appraisal; you’ll want to find this out before closing on your home. Not all lenders charge an application fee, and they will usually work with you on reducing them.
Before you and the seller close on your new home, an attorney must look over the closing documents to make sure everything is correct. In addition, they may conduct a title search to make sure there aren’t any liens that need to be paid at closing. They charge a fee for these services.
A surveyor must examine the property to verify the property lines and check for shared fences. Not all states require a survey, but if a survey is conducted, the surveyor charges a fee. You may also want to hire your own surveyor.
Real estate agencies usually have someone inspect the home to ensure the property is in good condition and check for any repairs that need to be made before the closing. You may also want to get your own; if you don’t, the cost of the inspection done by the agency is included in the closing costs.
🏠 What about insurance costs?
Homeowner’s insurance covers any damage done to the home. It’s typically paid in a lump sum for the entire year. The first years’ insurance is paid at closing; however, homeowners will have to pay the insurance themselves every year following.
Owner’s Policy Title Insurance protects you in case a former owner, or someone else challenges your ownership of the home. You don’t have to get it, but it’s good to have if you’re buying an older home that has had several owners. Lender’s Policy Title Insurance assures the lender that you own the home and that they have a valid lien; it protects the lender in case there’s a problem with the title.
If your down payment is less than 20% of the cost of the loan, or if you’re not making any down payment at all, you may be required to pay private mortgage insurance. Most lenders ask you to pay the first month’s payment at closing.
💰 Are there fees for Mortgage or Escrow?
The mortgage company may ask you to put down two months of property tax and mortgage insurance when you buy a home. Instead of paying it up front, the mortgage company adds it to the closing costs.
The origination fee covers any administrative costs the mortgage lender may have. It usually only amounts to about one percent of the loan, but some loans have no origination fee.
A title company, escrow company, or attorney may be present at every home closing depending on the state. The mortgage company pays a fee to the title company, escrow company or attorney that conducts the closing – they then add this cost to the closing costs, so they can recover that fee.
Your first mortgage payment may not be due for over a month from the time you close on the home. Most lenders ask you to pay interest upfront that may accumulate between closing and the time you make your first mortgage payment.
These are just some of the potential closing costs you may have to pay when you close on a home; there are many others. If you want to get a better idea what closing costs you’ll have to pay when you close on your home, contact your lender and real estate agent.
Your real estate agent is the best source of information about the local community and real estate topics. Give the Ashton Realty Group a call today at 860-306-0694 to learn more about local areas, discuss selling a house, or tour available homes for sale.