What to Expect When Paying Buyer’s Closing Costs

 Congratulations!  You worked hard, saved your money, you conquered the daunting task of finding your perfect home, and now you’re ready to close the deal.  Chances are you’ve already thought about how much money you’ll be paying in real estate commissions as well as how much money you will spend on the down payment of the house, but have you thought about the other fees you’ll be expected to pay?  

You should be prepared to shell out more out-of-pocket expenses than just your down payment.  Typical closings costs run between 3% and 5% of the loan amount.  That means if you borrow $200,000 to purchase a home listed for sale, you can expect to pay somewhere between $6,000 and $10,000 in closing costs. Many of these line item fees are one-time expenditures, but a few will recur on an annual basis.  Here are the ABCs of closing costs…

•    Appraisal Fee
•    Buyer's Attorney Fees
•    Courier/Delivery Fees
•    Credit Report
•    Document Preparation Fee
•    Endorsements
•    Hazard Insurance Premiums (Fire, Flood, Wind, Etc.)
•    Interest (calculated from the day of closing to the due date of the first mortgage payment)
•    Lender's Attorney Fees
•    Lender's Inspection Fee
•    Loan Application Fee
•    Loan Discount Fee
•    Loan Origination Fee
•    Mortgage Broker Commission
•    Natural Hazard Disclosures
•    Notary Fee
•    Pest/Termite Inspection
•    Points (technique used to "buy down" the interest rate of the loan)
•    Private Mortgage Insurance (PMI) Premiums
•    Processing Fee
•    Property Taxes (calculated from the day of closing to the end of the current tax year)
•    Recording Fees
•    Settlement Fee
•    State, City, or County Transfer Taxes Fee
•    Tax (Doc) Stamps
•    Title Insurance
•    Title Search (to ensure clear title on the property)
•    Underwriting Fee
•    Wire Transfer Fee

Real estate property tax is one of the most costly fees associated with the purchase of a home.  Most lenders will ask you to pay this money up front and put it in an escrow account. The amount you pay at closing depends on the value of the house, the date of your closing, and the tax rate for area where the home is located.   

If you obtain a Good Faith Estimate from a lender, they will supply you with specific estimates for all the fees mentioned above.  And remember, it’s never a bad idea to get an estimate from 2-3 lenders so you can compare their costs.   

If you take the time to review the costs with your realtor, you will feel much better prepared when you arrive at the closing table.  Doing your homework will prevent you from getting caught paying unexpected fees and as a result you’ll feel satisfied that you negotiated the very best deal on your new home.