What Are Closing Costs?
You've found your dream home, the seller has accepted your offer, your loan has been approved and you're eager to move into your new home. But before you get the key, there's one more step--the closing.
Also called the settlement, the closing is the process of passing ownership of property from seller to buyer. And it can be bewildering. As a buyer, you will sign what seems like endless piles of documents and will have to present a sizeable check for the down payment and various closing costs. It's the fees associated with the closing that many times remains a mystery to many buyers who may simply hand over thousands of dollars without really knowing what they are paying for.
As a responsible buyer, you should be familiar with these costs that are both mortgage-related and government imposed. Although many of the fees may vary by locality, here are some common fees:
Appraisal Fee: This fee pays for the appraisal of the property. You may already have paid this fee at the beginning of your loan application process.
Credit Report Fee: This fee covers the cost of the credit report requested by the lender. This too may already have been paid when you applied for your loan.
Loan Origination Fee: This fee covers the lender's loan-processing costs. The fee is typically one percent of the total mortgage.
Loan Discount: You will pay this one-time charge if you have chosen to pay points to lower your interest rate. Each point you purchase equals one percent of the total loan.
Title Insurance Fees: These fees generally include costs for the title search, title examination, title insurance, document preparation and other miscellaneous title fees.
PMI Premium: If you buy a home with a low down payment, a lender usually requires that you pay a fee for mortgage insurance. This fee protects the lender against loss due to foreclosure. Once a new owner has 20 percent equity in their home, however, he or she can normally apply to eliminate this insurance.
Prepaid Interest Fee: This fee covers the interest payment from the date you purchases the home to the date of your first mortgage payment. Generally, if you buy a home early in the month, the prepaid interest fee will be substantially higher than if you buy it towards the end of the month.
Escrow Accounts: In locations where escrow accounts are common, a mortgage lender will usually start an account that holds funds for future annual property taxes and home insurance. At least one year advance plus two months worth of homeowner's insurance premium will be collected. In addition, taxes equal approximately to two months in excess of the number of months that have elapsed in the year are paid at closing. (If six months have passed, eight months of taxes will be collected.)
Recording Fees and transfer taxes: This expense is charged by most states for recording the purchase documents and transferring ownership of the property.
Make sure you consult a real estate professional in your area to find out which fees--and how much--you will be expected to pay during the closing of you prospective home. Keep in mind that you can negotiate these costs with the seller during the offering stage. In some instances, the seller might even agree to pay all of the settlement costs.
And Seth is hands-down the MOST responsive real estate professional with whom we have ever dealt and we’ve purchased many, many houses though the years! This to us has been a game changer in terms of our expectations going forward as Seth has now set the bar very high.
He is a genuinely kind and helpful person who sincerely cares about his customers and his extended network. He made the entire process seamless, painless, and timely. We so appreciate Seth’s professionalism and willingness to help and answer or anticipate questions at every turn.
We are pleased to enthusiastically recommend Seth Williams for all your real estate needs!
Todd & Tara
Ledge & Young was helpful and thoughtful during the process and make us feel comfortable during the closing period where we actually got to close earlier than scheduled which got us moved in quicker. I would recommend the Ledge & Young team to friends and family for great service and pride in what they do.
I became very friends with the team years ago when we first started the dreadful search in the crazy Boston market. I still keep in contact with these guys as they've gained my friendship amd respect personally amd professionally.
Home buying is a process and a half - and with the right team members you can rest assured that this team I was given was on their toes from the start and gained my confidence early on to a successful acceptance of our offer to the final signing on the closing documents!
Well done team. We thank you again.
We cannot thank you enough for walking us through the buying process. We appreciate your patience and amazing suggestions! Katie and Myles
From the beginning of our relationship with Seth until our close, I cannot say enough about how much he did for my wife and me. We had just moved back to the Boston area by way of Savannah, Georgia, and had our ideal setup already in mind: a single family in Winthrop. However, with all ideals, sometimes it just ain’t that easy. We put an offer on one of Seth’s listings. Given that our agent was operating out of state, we went in on this house with very little knowledge of the local housing market. Our offer was not accepted, but there was a silver lining: Seth reached out to us personally to explain the ins and outs of the current real estate market.
This is why we recommend Seth so highly. He didn’t have to reach out to us, nor did he have any obligation to give us some insight that might help our dream of living in Winthrop come true. But he did. After that, we signed a contract with him, and he found us exactly what we wanted. Although the single family market was limited and highly sought after, he made sure we had the first available viewing (this house had over 300 saves within its first 12 hours on Zillow), coached us through the most aggressive we could be with our budget, and put together an offer. It was accepted, and I am writing this review three days after closing.
Seth goes to bat for his clients. He listens to your wants and needs, and then synthesizes it into a strategy to ensure that you get what you are looking for. From acceptance to closing, he continually checked in with us, responded to every request we had, and was transparent and open with every move he made. I cannot say enough about this guy, and hope that this review helps get you where Seth got us.
We want to start off by saying THANK YOU!!! My wife and I decided in the middle of the summer that we were interested in selling our home and buying a new home with more land and better access to the highway. We reached out to Seth (he helped us buy the house we were selling) and he set up a zoom call with the 2 of us and Eric. They walked us through their process and how they thought our timeline would pan out. They came out to see the house and person and did their research to find the right list price and walked us through their thoughts. At that time my wife and I decided that they were the experts and had the knowledge and experience to make the best decision. They set up the open house and everything went perfect with all the social media postings and email blasts that went out to their client list causing a lot of visitors to come by and check out our home. Seth and Eric also went and viewed many houses with us and were always very honest with us while walking the houses and while discussing our thoughts afterwards. There were a couple times that Seth looked right at us and said “this isn’t the house for you guys. This reminds me more of the city neighborhood you live in now then the suburb neighborhood you guys have described.” They let us know if they thought something was overpriced right from the get go based on them researching the area before seeing the house. When it came down to the house we purchased they again the time to do further research on comps in the area to make sure we did not over offer and did a great job of negotiating with the seller’s realtor. They were able to get us the house for $50k under list price and with the home inspection as well. Seth and Eric kept communicating with us frequently throughout the entire process and answered texts, calls, and email promptly. To sum it all up when it comes to our experience we could not have asked for a better duo to help us along the way. The honesty, friendliness, professionalism, and experience of these guys is unbeatable. If you are looking to buy or sell you must reach out to Seth or Eric from Ledge & Young Real Estate and they will make sure you are taken care of. 12 out of 10 would definitely recommend.