There are a variety of fees that you will have to pay to finalize your real estate purchase.Regardless of which side of the table you will be on, these fees can add up a lot, depending on a variety of factors.Being able to accurately estimate your closing costs before you even make an offer on a home or put your home on the market is essential to being prepared for what the process is going to cost you up front.
Step 1: Make a calculation of your down payment.
The amount of money you have to put down and the type of loan you get will determine this.Some loans require a 20% down payment, while others will allow you to put down less.If you have a lot of money to put down, look for a loan that will work for you.Monthly mortgage insurance will be added to closing costs if you pay less than 20% down.The cost of mortgage insurance can be very high.If you have 20% equity in the home after paying 20% of the house's cost, your mortgage insurance will end.
Step 2: Determine how much your lender will charge.
This pays for the time and effort involved in creating a client file.A specific interest rate may be charged by some lenders.This charge is a percentage of the loan amount and is referred to as the number of points by the lender.A charge of 1 point is equal to 1 percent of the loan amount.
Step 3: The fees associated with the title company can be asked about.
Title insurance protects the lender against future legal problems and the title company makes sure there are no other claims on the property.At the time of the sale, the title to your property should be free and clear.The cost for these services varies from location to location.If not more, the title company could charge between $175 and $900 dollars for a $100,000 loan.The title company used is usually determined by the lender.Ask your lender if they will work with the title company you want to use if you have a strong preference.
Step 4: Determine the amount of the appraisal.
It is most likely to be between $300 and $400 dollars.To ensure that the loan amount is in line with the property's value, an appraisal is required by the mortgage lender.The lender will let you know how much the appraisal will cost.The tax assessor's appraisal is likely different from this one.
Step 5: Find out if your lender will charge for the credit report.
Fees may be incurred when you pull your credit report from the three major reporting bureaus.For about$15 per bureau, you can request a copy of your credit report.Ask your lender if they charge more than this amount.
Step 6: Determine the property taxes for your buyer.
Your house's location can affect local property taxes.You can get a history of the property taxes on the house from your real estate agent.
Step 7: The tax service fee should be determined.
It is required when the mortgage payment will include homeowner's insurance and property taxes.The fee is to pay for a third-party tax professional and will be set by the lender.
Step 8: Estimate your homeowner's insurance.
If you add homeowner's insurance, your auto insurance agent may be able to give you a package discount.If you are comparing insurance policies, make sure you consider all the terms in each proposal and not just the annual cost.Coverage for loss of the building, personal possessions and contents should be included in homeowner's insurance.Ask about provisions for loss of use and the cost to rebuild.
Step 9: Do you have to pay any other optional fees?
There are a lot of variables to consider when buying or selling a property.Ask your real estate agent if you are unsure.They should let you know what's in your best interest.Government recording fees vary by location and are paid to record your title with the appropriate government offices as part of your buyer closing costs.In some cases, a flood certification is required by the lender.If the property in question lies within a flood zone, your lender may require additional flood insurance.Some real estate transactions require a property survey.The property lines are shown in the survey.Reputable survey firms can be recommended by most lenders and brokers.Once your offer has been accepted, you can do other tests on the house.Most of these are paid for by you upfront, but some may be negotiated into the closing costs.
Step 10: Add up all of the buyer closing costs to calculate your initial escrow deposit.
Some of these are one time costs and some will be the first installments of a fee that you will pay monthly in your mortgage payment.If you owe taxes in the current year, the seller will pay you for the part of the year you did not own the house, so this will be reimbursed to you.You pay taxes in arrears, but homeowner's insurance is paid in advance.
Step 11: You can compare your calculation to the list of buyer closing costs that the lender chooses.
A "Good Faith Estimate" is an accurate list and estimate of these charges.If you don't understand the charges in the Good Faith Estimate, you can ask your mortgage lender about them.The origination fee may be negotiable.The worst thing that can happen is that the lender will say no.
Step 12: The real estate agent's fee is a percentage of the sale price.
The total cost will be determined by the final sale price of the home, even though the percentage should have been established when you hired your agent.The fee is split between the two if the buyer and seller have their own agents.The buyer of your home won't pay their agent directly.
Step 13: It is possible to offer a home warranty as part of the seller closing costs.
This warranty will protect the new buyer from major appliance breakdowns or structural problems occurring within the first year or so and also protects the seller from any liability for these problems.For the benefit provided, home warranties are inexpensive.In a weak housing market, this may be a good incentive for a buyer to purchase your home.
Step 14: Determine the amount of taxes that would be assessed on the property from the last bill until the closing date.
The buyer will not have to pay taxes on the house for a period in which they did not own it if you pay this.
Step 15: Negotiating any other closing costs.
The initial financial burden on the buyer can be lessened by sellers taking a portion of the closing costs.Once an initial offer is accepted, this amount will be negotiated.There are specific rules and guidelines for seller closing costs in many states.Some limit them to a small percentage of the purchase price.Depending on the state of the housing market in your area, you may be able to work out a mutually beneficial situation with the buyer.
Step 16: You have to add up all of the costs.
This will show you the cost of selling your property.Most of the cost of selling your property will come from the money you get for the house, unlike the buyer who has to come up with a lot of cash.You will have very little up front cost.