One thing I hear often causes a little anxiety for buyers and sellers is that you don't see your final settlement statements until a few days before closing. Given that this is an important transaction with significant financial implications, people are anxious when they can't see the final financials until so close to closing. Certainly, lenders can provide estimates of their fees and costs and title companies can provide estimates of other closing costs, but some things (taxes, HOA fees, etc) may not be available until closer to closing, which is why it is delayed. In addition to having the amounts, people are often also curious about what all the different fees are. Here is a quick guide to try to help with that.
Closing costs are made up of the fees associated with
1) purchasing a home
2) borrowing money, and
3) preparing paperwork to finalize the sale.
Your total closing costs will vary depending on where your new home is located, what type of property you are buying, the price of your home and the complexity of the transaction.
Taxes and other local fees:
Charges will vary according to local government requirements. Some may demand that property taxes be pro-rated according to when you officially own your home. You may also be required to pay personal property taxes, homeowner’s association dues, and other assessments that are specific to the area that you are moving into.
Costs associated with the mortgage:
This generally includes a variety of fees such as the loan origination fee, the appraisal fee and the cost of credit reports. Other related closing fees may include hazard and mortgage insurance, and interest accrued on the mortgage between closing date and the end of the month.
Property Protection Costs
These are costs associated with activities intended to protect your and your lenders interests in the property.
You will have to pay for any research involving public records and title history for your new property. This insures that the title is unencumbered by other ownership claims or liens and can be delivered to you at closing. Other costs include recording and transfer fees, which cover legally recording the deed to your name.
Attorney fees: Both the homebuyer and the seller might have their own legal representation to prepare and record legal documents. Frequently, however, where an attorney is acting as a settlement agent, there may only be one involved in the closing. Who pays for those services is a matter of contract negotiation. Note, in Collier County, the buyer chooses the closing company. If they choose an attorney versus a title company, the seller will not have the option of utilizing a title company for their side as the title companies make their money off of the buyer securing title insurance through them. As such, they do not handle closings when it is just the seller. [Seller and Buyer Paid]
Real estate commission: This is the total dollar amount of the real estate broker’s sales commission, which is usually paid by the seller. This commission is typically a percentage of the selling price of the home. [Seller Paid]
Here is a great calculator by a local mortgage group that can help you project estimated closing costs. If you are not already working with a real estate agent, please reach out to me and I am happy to facilitate getting you estimates. CLICK HERE
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