When I ask “Do you know what it will cost to buy your home?”, I’m not referring to the amount of your mortgage or interest rate. I’m talking about the [tag]closing costs[/tag], [tag]escrows[/tag] and pro-rated reimbursements that you will have to pay out of your pocket at the closing table.
If you are working with a real estate agent or [tag]mortgage[/tag] broker, I encourage you to obtain a “[tag]Good Faith Estimate[/tag]” of your closing costs as early as possible. Although this is only an estimate of what you can expect to pay at settlement, an early review of your anticipated costs can be quite eye opening. It can also paint a clear picture of whether you actually have enough money to get into that beautiful home that you can’t stop thinking about.
Your Good Faith Estimate should include the following:
- Mortgage [tag]Origination Costs[/tag]: mortgage origination fee, appraisal cost, credit report costs, document preparation fee, flood certification fee, [tag]underwriting[/tag] fee;
- [tag]Title Insurance[/tag] Costs: title premium, policy endorsements, service fees;
- Escrows Required By the Lender: real estate taxes, homeowners insurance, condo/Homeowners Association dues, mortgage insurance;
- Reimbursements to Seller: real estate taxes, sewer bill, condo/Homeowners Association dues;
- Other closing costs: real estate transfer tax fees, recording fees, home inspection fees, homeowners insurance, notary fees, termite inspection.
Your Good Faith Estimate should also include a final breakdown of the total funds you need to bring to the settlement table (your out of pocket costs) as well as your estimated all-in mortgage payment (inclusive of your principal, interest, real estate taxes, homeowners insurance, mortgage insurance and condo fees).
Most importantly, do not forget that this is an estimate! You should always plan that your actual costs at settlement may be higher. If you review the Good Faith Estimate early in the home-buying process and plan to pay slightly higher costs at closing, you will go along way toward eliminating unpleasant surprises at the settlement table.