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!
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:
Usually about 1 percent of the total loan amount.
Average is under $300, though some experts report charges up to $500. Most lenders charge an application or "lender’s processing” fee.
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.
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.
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.
A full-year hazard (homeowner’s) insurance policy premium payment This policy protects the lender against loss from fire, wind, or other natural disasters.
Two months' worth strong
Typically, two months' worth in reserves.
Varies. Lenders may require flood insurance, depending on the property location.
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.
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.
Two months' worth
Two months' worth strong
Two months' worth
Annual assessments made by your condominium or homeowners association also may be included in your monthly mortgage payments.
About $200 A title search is done to make sure there aren’t any unpaid mortgages or tax liens on the property.
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.
Average about $200 Lenders and title companies sometimes charge this fee, saying it covers the cost of preparing final legal papers.
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.
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.
Average about $100
Covers getting the sale recorded in the public record.
Usually paid by the buyer
About $500 Sometimes a lender requires a survey of the property.
Depending on location, a termite or other pest inspection may be required.
Covers the cost of evaluating lead-based paint risk.
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.
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 (aka one of our agents).