You finally save enough money for a down payment and find your dream home! You make an offer, and it was accepted! Congratulations! But, wait … there may be some costs involved in the purchase that you were not anticipating. These costs can be overwhelming, and it is important for your real estate agent, mortgage broker, and attorney to explain these expenses so that you can anticipate what lays ahead.
Closing costs will vary based on the location of the property, the type of dwelling, the purchase price and the mortgage amount. The seller, the buyer, and the lender are all responsible for their own closings costs.
The mortgage involves certain “origination charges” that a purchaser will be responsible for such as points depending on the loan amount and underwriting fees. These are typically charges that you should go over with your mortgage broker.
A purchaser does have the ability to shop for some of the closing costs. The purchaser has the right to choose the title company, which will be insuring the title to the property. Typically, the attorney for the purchaser will make this selection. We always provide our clients with an estimated title bill when requested so that our clients feel more comfortable and included in the process. Title charges included many of the searches the company must perform to comply with governmental regulations, and, most importantly, the actual title insurance policy that will protect the purchaser from any adverse claims to the property. The title company will also handle recording the deed and mortgage with the county and paying all of the requisite filing fees. At the closing table, it is customary to tip the title closer anywhere from $150 to $250. Other charges the purchaser may shop for are new surveyors and termite inspections. Of course, the purchaser also has a right to shop for an attorney, which is also considered a closing cost. Reasonable attorney fees are said to be from $1,300 to $1,500 on Long Island.
Typically, a purchaser does not have the ability to shop for the appraisal fee, credit report, flood certification, and tax service charge. These charges are typically chosen by the lender. Sometime, a purchaser may ask their lender to shop for a different appraiser if he or she is dissatisfied with the estimated fee quoted. Other costs invovled may include taxes and transfer fees.
Closing costs also encompass some prepaid expenses that the purchaser must pay ahead of time to fund the “escrow account” so that later bills can be paid when they become due. These prepaid expenses include homeowner’s insurance premium, any mortgage insurance premiums, interest charges, and property taxes. These costs are due at the time of closings, but are not “fees” for any services, unlike the previously discussed expenses. These prepaid costs are being held on behalf of the purchaser to make sure those insurance and tax bills will be paid in the future on behalf of the purchasers.
Closing costs for a purchaser can range widely from $5,000 to $25,000. All of these different expenses vary, and closing costs are dependent on a multitude of different factors. However, it is important to realize that, as a purchaser, you will be required to pay closing costs in addition to your down payment and any additional cash that you are putting towards the purchase of the property.
What If I Do Not Have Enough Money For Closing Costs?
Do not despair! You have options! If you need additional funds for closing costs, you may want to consider borrowing these funds from your lender. A “seller’s concession” is when the seller actually pays some of your closing costs by raising the purchase price of the home.
For example, if the original purchase price is $400,000, but you would like to receive an additional $10,000 towards your closing costs, then the seller may wish to increase the purchase price to $410,000 (with $10,000 in concessions). If you were originally planning on mortgaging $350,000 and paying $50,000 in cash, then you can adjust your mortgage amount to $360,000 and receive the excess $10,000 towards your closing costs. Keep in mind that the house will need to appraise for the next amount of $410,000 and you will be paying interest on the $10,000 your are borrowing for your closing costs. The interest rate will be whatever rate you lock your mortgage in at.
Have more questions or need a knowledgable real estate attorney to help you through this process? Give us a CALL TODAY! Let us deal with the stress so you can enjoy this exciting accomplishment!
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