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Real Estate
Common Closing Costs for Buyers
The lender must
disclose a good faith estimate of all settlement costs. A check to
cover your closing costs will probably have to be a cashier’s
check. The title company or other entity conducting the closing will
tell you the required amount for:
- Downpayment.
- Loan
origination fees.
- Points,
or loan discount fees you pay to receive a lower interest rate.
- Appraisal
fee.
- Credit
report.
- Private
mortgage insurance premium.
- Insurance
escrow for homeowners insurance, if being paid as part of the mortgage.
- Property
tax escrow, if being paid as part of the mortgage. Lenders keep funds
for taxes and insurance in escrow accounts as they are paid with the
mortgage, then pay the insurance or taxes for you.
- Deed
recording fees.
- Title
insurance policy premiums.
- Survey.
- Inspection
fees—building inspection, termites, etc.
- Notary
fees.
- Prorations
for your share of costs such as utility bills and property taxes.
A Note About
Prorations.
Because such costs are usually paid on either a monthly or yearly
basis, you might have to pay a bill for services used by the sellers
before they moved. Proration is a way for the sellers to pay you back
or for you to pay them for bills they may have paid in advance. For
example, the gas company usually sends a bill each month for the gas
used during the previous month. But assume you buy the home on the 6th
of the month. You would owe the gas company for only the days from the
6th to the end for the month. The seller would owe for the first 5
days. The bill would be prorated for the number of days in the month,
and then each person would be responsible for the days of his or her
ownership.
What to Keep
From Your Closing
- The
Real Estate Settlement Procedures Act (RESPA) statement. This form,
sometimes called a HUD 1 statement, itemizes all the costs associated
with the closing. You’ll need for income tax purposes and
when you sell the home.
- The
Truth in Lending Statement summarizes the terms of your mortgage loan.
- The
mortgage and the note (two pieces of paper) spell out the legal terms
of your mortgage obligation and the agreed-upon repayment terms.
- The
deed transfers ownership of the property to you.
- Affidavits
swearing to various statements by either party. For example, the
sellers will often sign an affidavit stating that they have not
incurred any liens on the property.
- Riders
are amendments to the sales contract that affect your rights. For
example, if you buy a condominium, you may have a rider outline the
condo association’s rules and restrictions.
- Insurance
policies provide a record and proof of your coverage.
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