If youre looking to buy a home, or are in the process of doing so, youre probably wondering what it means when people talk about closing costs. Its a vague term, and one that makes a lot of people wary because it implies reading fine print and possible extra fees. Thats exactly what closing costs are. The good news is that many fees associated with closing costs are easy to afford.
Once the home buyer, the home seller, the banks involved and any and all real estate brokers or agents are satisfied that all terms of a home sale have been met, one of the last things left to do is pay the closing costs. The following is a brief overview of some of the most common closing costs:
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-Pro-rata Property Taxes. Any taxes on the home that need to be paid by the buyer or seller or both, contingent upon the date of the sale.
-Pro-rata Homeowner Association Dues. To be paid by the buyer or seller or both, if the home is a part of a Homeowners Association.
-Home Warranties. Good for one year after the purchase of the home to cover the failure of any major systems.
-Inspection Fees. Normally paid by the buyer to verify that the property doesnt have hidden problems.
-Appraisal Fees. Paid to an appraiser who verifies that the house is worth the price being asked for it.
-Points. Prepaid interest charged by the bank thats lending the mortgage.
-Prepaid Property Insurance. Required by the mortgage lender to verify that the home is insured by the new owner for one year in advance.
-Pro-rata Interest. Interest on the mortgage as incurred by the dates of the sale.
-Recording fees. Paid to government for recording the transfer of ownership between parties.
-Mortgage Application Fee. Paid by the buyer to the mortgage company for processing the loan.
-Survey Fee. Properties must be surveyed for dimensions and other physical questions before sale.
-Brokerage Commission. Paid to the mortgage broker who sold the home for the seller. Paid by the seller.
-Title Service Costs. Pays for title search and title insurance and any other title issue.
-Document or Transaction Stamps or Taxes. Paid to the local government for all paperwork needs.
Closing costs can really add up, so if you have questions about them, be sure to go over them in detail with a real estate industry expert before you begin your search for a new home.
