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March 4, 2015

Close-up on Closing Costs

When you’re buying a home, you’ll hear the phrase ‘closing costs’ over and over again. But what exactly are they? Typically, how much are they? Many home buyers have absolutely no idea – and are sometimes caught unaware. Here’s a quick primer on closing costs – and how you can prepare for them. First of all, closing costs will vary widely based upon your location and the home you’re purchasing. Keep in mind that if this is your second or third home buying experience, your closing costs may be very different this time if you’re moving to a different area or getting a house that is much newer or older than the one you’ve owned before. Some common elements included in closing costs are:
  • Credit report fees.
  • A loan origination fee, which lenders charge for processing the loan paperwork for you.
  • Attorney’s fees.
  • Inspection fees, if required or requested by any party.
  • Discount points, or fees you pay in exchange for a lower interest rate.
  • Appraisal fee.
  • A survey fee for the cost of verifying property lines.
  • Title insurance, which protects the lender if the title isn’t clean.
  • Title search fees, which pay for a background check on the title to make sure there aren't things such as unpaid mortgages or tax liens on the property.
  • Escrow deposit, which may pay for a couple months' property taxes and private mortgage insurance.
  • Pest inspection fee.
  • A recording fee, paid to a city or county in return for recording the new land records.
  • Underwriting fee, which covers the cost of evaluating a mortgage loan application.
So how much will all this cost? In most cases, home buyers can expect to pay between two to five percent of the purchase price of the home in closing costs. For example, if the price of your home is $150,000, you should pay between $3,000 and $7,500 in closing costs. Recent surveys show that most buyers pay around $3,700 in closing costs. Keep in mind that lenders must provide a good faith estimate (GFE) of the closing costs on your home within three days of the date you apply for a loan. This is the law. But these numbers are an estimate, and a good number of the fees shown on the GFE can legally change by up to ten percent. This can add thousands of dollars to your final closing cost bill. Within 24 hours of your closing, your lender should provide a HUD-1 settlement statement, summarizing your closing costs. Compare this statement to the GFE and ask your lender what each line item on your closing costs represents and if it is required. Most homeowners find that some of the fees that appear in closing costs can be negotiated. If you have any questions about closing costs, don’t hesitate to ask your lender or your attorney. You can also contact us at Ernest Signature Custom Homes – we’re always glad to help! Drop us an email or call us at (912) 756-4135.
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