New home buyers experience many exciting things during the home buying process. They tour incredible homes, meet new people, and are introduced to new settings. Along the way, you may hear real estate terms you’re not familiar with right now. One of those terms is closing costs. So, what are the closing costs basics when buying a house? We’re glad you asked!
The final step in the home buying process is the closing. Closing day is the celebration of purchasing a home, and you’ll walk away with the keys in your hand. Before they hand over those keys, however, you’ll be required to pay any closing costs associated with the transaction. These costs are typically between two and five percent of the selling price of the house. You’ll need to pay these out-of-pocket, unless they are covered by the seller. The closing costs are the sum of the fees and charges collected during the home buying process. Because of this, there is no single person or business that determines this sum.
When you get the ball rolling on your home mortgage loan, your lender will provide you with an estimate of the closing costs. This is just a preliminary number and can change drastically during the course of the transaction. Right before closing day, your lender will provide you with an itemized list of all fees and a final amount owed at closing.
Get with your real estate agent and look this list over closely. Make sure there are no over-inflated fees or fees that are not necessary. Don’t be afraid to ask questions and get answers. If you are uncomfortable with the final amount, you can look elsewhere for your mortgage loan. You are not obligated to proceed with a loan that doesn’t add up when it comes to those closing costs.
Now that you know what closing costs are, we’re sure that you’re curious about more specific items that could be on the closing costs’ itemized list. Here is a list of possible fees and charges. Keep in mind that these vary and this is not an all-inclusive list.
- Credit Report – Sometimes this is free, but in some instances you will be charged a fee for the running of credit reports. They need these reports to determine whether or not you are loan worthy.
- Origination Fee – This is a rather vague term for any fees that cover labor or paperwork filing that is needed during the real estate transaction. This fees are usually for work completed by your lender or whoever is processing the loan.
- Attorney Fees – These fees cover time involved and specific tasks completed by the attorney that works with you during the home buying process.
- Title Search – A complete background search will be done on the title of the property. They want to make sure there are no outstanding debts or liens.
- Title Insurance – This is secured at the time of the title search. It protects the mortgage lender in the event that something shows up in a negative light in relation to the title.
- Survey Fees – If there is a question about property lines, or if the lender just wants to be sure of the lines, a land survey may be ordered. This is to ensure that the borders are correct on the paperwork.
- Appraisal Fee – The appraisal is ordered by the mortgage lender to make sure the house value equals the selling price.
- Real Estate Agent or Brokerage Commission – This is the amount paid to the real estate agent or brokerage for helping you during the home buying process. This is typically the amount that you agree upon at the beginning of the process.
- Home Warranty – You may choose to purchase one of these to give you some peace of mind during the first year you own the home. These are sometimes paid for by the seller.
- Escrow Deposit – This covers insurances and property taxes.
- Inspection Fees – Inspections can be anything from structural to pests to make sure the property is in proper shape.
Your real estate agent is the best person to ask when you have questions about the home buying process. Give one of the agents at TeamWorks WorldWide a call at 941-779-5149 to have your questions answered or to tour available homes for sale in Bradenton and surrounding areas.