Buying a Home: Closing Costs
💸🧐Whether you've bought a house before, or if you're thinking about buying for the first time, you likely heard the term "closing costs" and wondered what these mysterious things were.
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💲👉The costs due at closing can be broken down into three basic categories – Loan related fees, title related fees, and pre-paid/escrow costs.
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💵📑Loan related fees include an origination fee that covers everything your lender takes care of on your behalf from going under contract to closing - processing, underwriting, document preparation, and administrative work. They also include third-party costs like an appraisal fee, a credit report fee, and a flood certification.
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📄✍️Title related fees cover the services the title company provides to help close your transaction – a closing fee, a lender’s title insurance policy, county mortgage note and deed recording fees, tax stamps, and transfer tax.
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💰📆The final cost is that to set up your escrow account. This is basically a reserve account for your homeowner’s insurance (HOI) and property taxes so your lender can pay them on your behalf when they are due throughout the year. You will also pay pre-paid interest to cover the initial month you take ownership of the home before you start making a mortage payment. (Note: With some loan structures, you can opt not to escrow your HOI and taxes and pay them separately)
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☝️🏘If you purchase a home with an HOA, a new construction home, or a home in a condo community you will also have some costs associated with those specific situations.
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💵🤝You are able to negotiate credits to help pay for these costs if it makes sense for you individually with your specific property and scenario!
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🤯🔑Now it probably makes sense why everyone just generalizes “closing costs” - there is so much that actually goes into them it could make your head spin. Hopefully this helps show how important it is to sit down with someone who can walk you through all of these costs, and what you can expect as you prepare to purchase a home!