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Understanding Closing Costs for What They Are

Principal, down payment, and interest rate are not the only costs associated with owning a house. When you go ahead and take the big plunge, you must be prepared for paying closing costs, as well. Closing costs, simply put, are costs that your lender and some others charge you when you finally close the deal. Although, when dealing with a VA loan and in some other cases, the seller may share a part of the expenses, it is mostly the buyer who is expected to pay the closing expenses. Common charges that come under closing costs Typically, different locations demand different closing costs. However, the following expenses are almost always present: •  Credit report running fee •  Loan origination charge, expected by your lender for loan paperwork processing •  Attorney fee •  Optional inspection charges, either requested by you or your lender •  Discount points fee, paid to obtain an interest rate that is slightly lower than normal •  Appraisal charges •  Survey costs, associated with property line verification •  Title insurance cost, charged for lender protection if the title is found to be not clean •  Title search cost, paid in exchange for a helpful background check that investigates if there is any unpaid mortgage or outstanding tax associated with the property in question •  Escrow deposit •  Pest inspection charges •  Recording fees, charged by the county or city to record your newly acquired land •  Underwriting charge How much can you expect to pay? A recent survey stated that the average closing amount paid by a homebuyer tends to be about $3,700. However, that amount may vary depending on the cost of the house you purchase. Usually, closing costs remain between 2 percent and 5 percent of the amount you pay for a house, which means that a house with a price tag of $150,000 will attract anywhere from $3,000 to $7,500. The law requires your lender to provide you a GFE, or Good Faith Estimate, within 3 days of your loan application submission date. GFE is a statement, or a kind of estimation, of the total closing costs you may expect to pay. However, it is best to not take the statement too seriously, as certain GFE fee listings may rise by as much as 10 percent later. That may significantly increase the final closing costs. Once you close your deal, your lender is going to hand you over a HUD-1 statement of settlement within a day. When you receive the HUD-1, be sure to compare it to the GFE given to you previously. That is, in order to find out and take a note of the charges that are present in the former, but not in the latter. Many a times, certain fees included under the HUD- 1 may not be really necessary to pay. For example, if your lender adds high administrative fees, courier charges, and certain other similar expenses to the statement, you may want to negotiate things a bit. In case you find your final closing expenses to be unusually high or unreasonable, you may go ahead and contact a different lender.

Real Estate Law

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Katherine M. Blahut, PLLC

Katherine Blahut has been a board certified real estate lawyer for more than 15 years. She can handle any and all of your real estate needs. You can call her at: 1-786-333-4260