Understanding the Common Closing Costs for Buyers
When approaching the closing process, it’s crucial to be aware of the various costs involved. Here’s a breakdown of common closing costs that you should anticipate:
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Downpayment: The initial payment made towards the home’s purchase.
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Loan Origination Fees: Charges from the lender for processing the loan.
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Points: Fees paid to lower the interest rate on your mortgage.
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Appraisal Fee: Cost associated with assessing the property’s value.
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Credit Report: Fee for obtaining your credit history.
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Private Mortgage Insurance Premium: Insurance for the lender in case of a low downpayment.
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Insurance Escrow: Allocation for homeowners' insurance if part of the mortgage.
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Property Tax Escrow: Funds set aside for property taxes, often paid with the mortgage.
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Deed Recording Fees: Charges for recording the property transaction.
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Title Insurance Policy Premiums: Insurance safeguarding against potential title issues.
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Survey: Cost associated with property surveys for legal clarity.
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Inspection Fees: Charges for various inspections such as building, termites, etc.
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Notary Fees: Charges for notarizing relevant documents.
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Prorations: Adjustment for shared costs like utility bills and property taxes based on the closing date.
Note on Prorations: Given that many costs are paid periodically, prorations ensure fair distribution. For instance, if you purchase a home mid-month, utility bills and taxes are prorated, reflecting your ownership period and reimbursing the seller for any prepaid amounts.
Remember, these costs contribute to a comprehensive estimate provided by the lender before closing. It’s advisable to be well-prepared with a cashier’s check to cover these expenses as communicated by the title company or the entity conducting the closing.
