What Closing Costs Should I Expect?
Once you are through with negotiations with the seller and tender an offer which is acceptable to the seller, you proceed to the last step of closing a real estate transaction which is related to payment of all closing costs.
Let us begin by understanding what closing costs are.
Closing costs refer to various fees and expenses likely to be incurred by the purchaser of the home at the time of closing a real estate deal.
Most people approach this session with a lot of anxiety simply because they have little or no idea of the costs involved in closing.
As a prudent real estate investor it is desirable to ask for a sheet of paper estimating all the closing costs.
This document is commonly known as the "good faith estimate" and you must demand this from the mortgage lender or broker.
It must however be well understand that these costs have little to do with expenses towards broker fee but more relate to mortgage administration and documentation.
While reviewing the estimate of the closing costs, understand the various costs which shall have to be paid annually and those which are one time expenses.
Most of insurance related expenses, property taxes and mortgage repayments shall be recurring in nature.
A careful segregation of nature of expenses and a little planning for the financial closure session would go a long way in comfortable sailing through the closure without any unpleasant surprises.
A number of cost elements of closure are chargeable to you only in case you have availed a home loan.
There are a few other general costs as well which you will have to bear irrespective of whether you go to a lender or not.
Mortgage related costs include.
o Loan Origination and Administration fee - The fee payable to the lending institute towards processing your home loan and generally amounts to app.
1% of the loan amount.
o Loan Application fee - A fixed amount charged by the lending institute towards loan application and varies between 100-500 USD.
o Private Mortgage Insurance (PMI) premium - In case the amount of the loan availed by the buyer is greater than 80% of the value of the loan appraised by an appraiser, the buyer shall have to bear additional expenses by making a premium payment towards PMI.
o Homeowner's insurance - It is mandatory to take a home owner's insurance in case you have financed your home purchase by way of a home loan.
Most of the financial planners and experts generally estimate the closure costs for a mortgage case to be close to 5% of the value of the loan.
General closure costs include expenses and fees payable to the real estate broker, attorneys, home inspector, title and recording fee, documentation fee and appraisal fee.
You must go into details of each and every cost component of closure.
This would help you become wiser for future transactions.
You may also seek the help of a professional tax consultant to get details of tax concessions related to closure costs.
Let us begin by understanding what closing costs are.
Closing costs refer to various fees and expenses likely to be incurred by the purchaser of the home at the time of closing a real estate deal.
Most people approach this session with a lot of anxiety simply because they have little or no idea of the costs involved in closing.
As a prudent real estate investor it is desirable to ask for a sheet of paper estimating all the closing costs.
This document is commonly known as the "good faith estimate" and you must demand this from the mortgage lender or broker.
It must however be well understand that these costs have little to do with expenses towards broker fee but more relate to mortgage administration and documentation.
While reviewing the estimate of the closing costs, understand the various costs which shall have to be paid annually and those which are one time expenses.
Most of insurance related expenses, property taxes and mortgage repayments shall be recurring in nature.
A careful segregation of nature of expenses and a little planning for the financial closure session would go a long way in comfortable sailing through the closure without any unpleasant surprises.
A number of cost elements of closure are chargeable to you only in case you have availed a home loan.
There are a few other general costs as well which you will have to bear irrespective of whether you go to a lender or not.
Mortgage related costs include.
o Loan Origination and Administration fee - The fee payable to the lending institute towards processing your home loan and generally amounts to app.
1% of the loan amount.
o Loan Application fee - A fixed amount charged by the lending institute towards loan application and varies between 100-500 USD.
o Private Mortgage Insurance (PMI) premium - In case the amount of the loan availed by the buyer is greater than 80% of the value of the loan appraised by an appraiser, the buyer shall have to bear additional expenses by making a premium payment towards PMI.
o Homeowner's insurance - It is mandatory to take a home owner's insurance in case you have financed your home purchase by way of a home loan.
Most of the financial planners and experts generally estimate the closure costs for a mortgage case to be close to 5% of the value of the loan.
General closure costs include expenses and fees payable to the real estate broker, attorneys, home inspector, title and recording fee, documentation fee and appraisal fee.
You must go into details of each and every cost component of closure.
This would help you become wiser for future transactions.
You may also seek the help of a professional tax consultant to get details of tax concessions related to closure costs.
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