Closing costs can often add up when you
have taken out a mortgage. By knowing what closing costs and fees will
apply, you will be prepared for closing and owning your home. Closing
costs include things such as real estate transactions, attorney fees,
appraisals, credit reports, prepaid interest, homeowner’s insurance, title
insurance and reserves that the lender collects for future taxes and
insurance. Each of these different aspects of closing costs can add up
when you have made all of the payments towards your home or loan that you
think is necessary. It is estimated that closing costs will be an average
of $3,000 to $4,000, depending on the types of inspections, insurance and
documentation that needs to be prepared and finished before you can own
your own home.
The first fee which will be a part of closing costs is the appraisal. This
will give you an estimate of how much your home is worth at the time of
closing. It includes giving you information and documentation on what will
be the highest and best use for your property. These usually cost an
estimated $200-$450, depending on the area in which you live and the value
of real estate at that time. A second type of fee is the commitment fee.
These fees are charged by investors or lenders have committed to your
loan. A third documentation fee is the application fee. This is taken at
the time of closing if your loan closes.
Another type of fee to keep in mind with the closing costs is attorney
fees. Attorneys are used for the loan closing of the mortgage and usually
review all of the documentation available for the closing costs. Another
cost will be for a broker. This will be for the administrative, processing
and transaction fees that take place between the broker and mortgagee. If
document preparation is performed by a third party, other than the broker,
there will be another charge for this. This may include documentation such
as deed of trust, warranty deed, housing authority addendum, release of
trust and power of attorney. It may also include other closing loan
contracts or documentation such as processing costs. There is also a
closing fee which is charged. If the closing fee is closed by a third
person, such as a real estate person, there may be a customary cost.
Other costs will come from inspection of the home and insurance. The most
common type of insurance that you will need is home owners insurance. This
type of insurance is required to get at least one year in advance to
protect the assets in your home as well as your home. Title insurance is
also required to buy once your home is off of the mortgage. This will
insure a lender of any liens on the property. Loans will not be closed
until inspections are made and this type of inspection and insurance is
resolved. Another possible type of insurance is those used for a flood
plan. If you are living in a flood zone, you must pay for flood insurance
at the time of the loan closing. There is also a possibility of getting a
flood certification. This will allow you to continue have flood zone
status during and after the mortgage. It will be paid at the time of
closing. Another type of insurance is hazard insurance premium which will
be added in closing costs. There are also inspection fees at the time of
closing. This includes a home inspection service fee, which usually is
around $300. Pest inspection may also be a separate fee which is included
in the closing costs. A third type of inspection that may be included is a
well and septic fee, if this is part of your home.
Another kind of cost which will be added during closing costs includes
property taxes and assessments. The most well known deposit for taxes is
known as an escrow. This is set up so that your taxes will continue to be
paid after the loan and begin with a deposit at the time of closing.
Transfer taxes are the other type of taxes available at the time of
closing.
When looking into closing your mortgage, it is important to find the
lowest fees and best way to get the documentation without having too much
hassle. There are several ways to get free quotes and to find the proper
tools in order to keep closing costs down and make the process of owning
your own home as simple as possible.
