Closing and Settlement Costs for Real Estate Transactions
There are three basic categories of charges and fees in settlement or closing transactions involving purchase and sale of real estate:
1. Charges for establishing and transferring ownership.
These include title search, title insurance, related legal fees, escrow feels and fees for conducting the settlement.
A title search is a search of the public records that establishes that the owner has clear title and ensures that there are no claims of ownership against the property you’re buying. A title company or a lawyer usually performs this search. Also estimate $150 to cover such items as notary and document recordings and endorsements.
2. Amounts paid to state and local governments.
These include city, county and state transfer taxes, recordation fees, and prepaid property taxes. These are involved in handling and recording paperwork for purchase and property taxes. A city transfer tax or municipal tax can be imposed within the corporate limits of some cities. Cost is limited to $3.30 per $1,000 of selling price.
3. Costs of getting a mortgage.
These include survey, appraisal, credits checks (consumer can obtain one report annual at no cost), loan documentation fees, notary charges, loan origination, commitment and processing fees, hazard insurance, interest prepayments, and lender’s inspection fees. How much you pay depends on the time of the month you close, as these are calculated daily and are either prepaid or prorated.
Mortgage related closing costs included:
Application fee. Imposed by lender, which covers the initial costs of processing your loan request and checking credit report.
Appraisal Fee.
Many lenders require home to be appraised (opinion or estimate of value) to ensure value is not less than the loan. Budget $300 to #500 for this.
Survey.
Lender usually require independent verification that your lot has not bee encroached upon by structures since last survey conducted on the property. This might be taken care of by title insurance company.
Loan origination fees and discounts points.
Costs incurred by lender in evaluating and preparing mortgage loan. Discount points are paid to lender at closing in order to lower the interest rate. One point equals 1 percent of loan amount. Government regulations allow only 1 percent origination fee on FHA or VA loans.
Mortgage insurance.
Buyer who makes down payment of less than 20 percent of value may be required by lender to take out private mortgage insurance, which covers lender’s risk in event buyer fails to make payments.
Homeowner’s and Hazard Insurance.
This is protection against physical damage to house by fire, wind, vandalism and other causes. Your lender will expect you to have a policy in effect at closing.
Other possible inspection fees:
Roof inspections
Geological reports
Septic tank inspection
Radon inspection
Wood destroying pest and damage repair inspection
Asbestosis inspection
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Disclaimer: The information contained herein is not the providing of legal services or services of an accountant. If a person wants or needs such professional services, he or she must contact and retain counsel or a certified public accountant. There are risks associated with the acquisition and ownership of real estate.
This information is provided by
Harrison & Christi Long
"Explore Real Estate" Team
Coldwell Banker
949-854-7747
