Buyers
Closing Costs:
So you are getting an FHA loan w/3.5% down.
Excellent! Do you have money for closing costs? Hmm...No
worries...
Closing Costs can often be negotiated in
to the purchase of the home, so if you do not have another 3-5% saved up
for closing costs...have no fear...most other first time home buyers don't
either!
What are Closing Costs?
At closing you will be given a form called the HUD-1.
This form shows
the cost of completing your real estate transaction. An itemized review.
These
costs should come as no surprise to you, as your lender should have provided you with an
"estimated cost of closing sheet" at the beginning of
the home buying process. This make getting the loan process started, all the more
important.
Not all of the following charges will apply to your loan, but here is an
overview:
Loan Origination :
Usually about 1 percent of the total loan amount.
Buyer Application :
Average is under $300, though some experts report charges up to $500. Most lenders charge an application or "lender’s processing” fee.
Buyer Appraisal:
Expect about $300. It can be higher or lower,
depending on the size of the property and appraisal fees in your area. The bank hires an independent appraiser to determine whether the property is worth the sales price you’ve offered for it.
Buyer Credit report:
Also called a "credit check fee,” averages about $25 per credit report checked, although some borrowers have paid three times more. This fee, also called a "credit check fee,” averages about $25 per credit report checked, although some borrowers have paid three times more. The lender analyzes your credit history by scrutinizing credit scores and reports — a critical step toward deciding whether to loan you money and how much.
Types of Insurance required by the lender, paid for by the buyer :
Mortgage :
Varies Some lenders require borrowers to pay their first year’s mortgage insurance premium up front. Other lenders ask for a lump sum
insurance premium payment at closing that covers the life of the loan.
Hazard :
A full-year hazard (homeowner’s) insurance policy premium payment This policy protects the lender against loss from
fire, wind, or other natural disasters.
Mortgage in Escrow:Two months' worth strong
Hazard
in Escrow : Typically, two months' worth in reserves.
Flood:
Varies. Lenders may require flood insurance, depending on the property location.
Title: This fee averages about $350 but can be as high as one percent of the loan, depending on your state of residence. Title insurance is a policy that protects the
owner by guaranteeing the title to the property is clear.
Reserve account funds:
Your monthly mortgage payments are likely to include a pro-rated amount to cover payments for property taxes and homeowner’s
insurance, also called "hazard” insurance. This money is held in a "reserve” or "escrow” account by the lender who makes the payments for you. At closing, your lender may require you to pony up advance payments just to be sure the reserve fund has enough money to pay the bills.
Buyer Homeowner’s insurance: Two months' worth
Buyer Mortgage insurance:Two months' worth strong
Buyer City property taxes:Two months' worth
Buyer Annual assessments:
Annual assessments made by your condominium or
homeowners association also may be included in your monthly mortgage payments.
Title charges: About $200 A title search is done to make sure there aren’t any unpaid mortgages or tax liens on the property.
Buyer: Title insurance:
About $350 but can be as high as one percent of the loan, depending on your state of residence. Title insurance is a policy that protects the
owner by guaranteeing the title to the property is clear. Note: There may be a second fee listed on the closing document to cover a separate policy that protects the lender.
Buyer Document preparation: Average about $200 Lenders and title companies sometimes charge this
fee, saying it covers the cost of preparing final legal papers.
Buyer Attorney :The fees could be under $500 or more than $1,000, depending on the situation.
In some parts of the country an attorney, not a title company, handles closing, and sometimes an attorney is hired by the lender to review certain documents.
Government recording and transfer charges:There are great differences in the practices of state and local governments. Who pays which of these fees also varies, according to the terms negotiated in the sales contract.
Recording : Average about $100
Covers getting the sale recorded in the public record.
Usually paid by the buyer
Buyer Survey: About $400 Sometimes a lender requires a survey of the property.
Pest inspection:
Depending on location, a termite or other pest inspection may be required.
Lead-based paint inspection:
Covers the cost of evaluating lead-based paint risk.
Radon test:
Covers the cost of testing for the presence of
radon gas, which can be a problem in some parts of the country. Who pays for testing — and mitigation, if necessary —
should be specified in the sales contract.
Courier :
Charged if a courier picks up and delivers
documents.
Make sure you are informed by ensuring your biggest
purchase ever is handled by a state licensed Realtor®. Do it yourself
projects sometimes make you vulnerable to the unexpected. Don’t
jeopardize your most valuable purchase. Seek a licensed
reputable Realtor® prior to any purchase or sale.
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Earnest Money
Earnest money is yesteryears firm handshake.
We like it. We want to buy it. Here is our offer to purchase and with it, our earnest money check.
How much Earnest Money do You Need?
Like many other answers regarding real estate-that depends.
1%, 2%, %%%, none, or an option.
What
is the right answer?
The right answer is basically dominated by local custom. Sounds quaint
doesn't it?
" What if the deal goes bad...can I get my money
back?"
The Rules of Being Earnest
This is where it becomes important that home buyers and sellers act in " earnest"
measures to get the home buying/selling process to its completion.
Buyers and Sellers must complete their respective pieces of the
contract in earnest-fulfilling the contract for all their
obligations. There are rarely few exceptions.
As a Charlotte homebuyer, even if you do your part to the letter and the seller
fails on their part, there is no instant refund.
Both parties have to agree
to its release with signatures. Or off to the local claims court it goes.
The earnest money is held in a regulated trust
account, not in our pocket. All guidelines are set forth by the NC Real
Estate Commission.
Home Buying-Get Ready and Win!
Get a LOAN APPROVAL (not pre- approval) for the offer price prior to
submitting a contract. This helps you on your ability to negotiate as
well as giving you the peace of mind you need to stay in your financial comfort
zone.
From the sellers viewpoint-Would you sell something to someone-just because they say they can afford
it?
Of course not.
Get the loan approval letter.
This will help you in contractual time constraints placed upon the
loan process (which is normal).
Secondly, all contingencies on the contract to purchase should be met in a
timely fashion.
Allowing such contingencies to be removed from the contract so
that things may proceed to closing.
This includes, inspections, appraisals, surveys, repairs and loan approval.
But in
reality its not about the earnest money, its about buying the house. When it
is all said and done, you will see your earnest money on the HUD-1 statement
being applied towards your home purchase.
Confused? Call Us~704-975-1733
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