Not only does your home likely represent one of the largest purchases you'll ever make, you also should be prepared to pay some upfront money at the closing. You should have a fairly accurate estimate of closing costs several weeks prior to your actual closing, but knowing what to expect is important. Read on to learn more about what closing costs to expect when you close on your new home.
Interest: If you get financing (and almost everyone does), the lender expects the interest payment for the current month to be paid. If you can, try to schedule your closing as close to the end of the month as possible to cut down on this pro-rated cost.
Insurance: In some cases, you will need to come up with a portion of the yearly hazard/fire insurance in advance. If you live in a flood zone, or are just being extra cautious, flood insurance is available in a separate policy and it also has an advance premium payment requirement, typically one-sixth of the yearly amount. Some homeowners have to buy private mortgage insurance (PMI), and you typically have to pay the first monthly payment upfront.
Lender Costs: These types of fees can be numerous and confusing, but don't hesitate to ask questions about anything you don't fully understand or agree with. Just some of many lender fees can include:
- Origination points: the mortgage broker's fee
- Application fee: loan processing fee
- Discount points: money paid for a lower interest rate
- Credit check fee: to view your credit report
- Appraisal fee: cost to have the home appraised
- Survey fee
- Tax fee: to verify that you paid your property taxes
- Administration fee: to pay for the underwriting of your loan
- Home inspection fee: unless you paid the home inspector directly, you will owe the lender for this cost.
Title Company Fees: these are fees paid to the title company and usually include:
- Recording fee: this covers the cost of the official filing at the county courthouse of your loan and property information.
- Notary fee: the mortgage deed must be notarized
- Title insurance: this is often a costly, but required and important expense and it guarantees that you won't have any issues later on with the title of your home. It can run around $1,000 or so.
- Escrow fee: in most cases, your mortgage payment, the property taxes and insurance premiums are all broken up into monthly payments. In the case the payments that are due only once a year, that amount goes into a special account, known as an escrow account. There are usually fees associated with the account set up.
- Escrow: in addition to the fee for setting the account up, you must also often deposit funds into the account in advance.
If you have questions about your closing costs, speak to your real estate agent.
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