real estate transactionBefore you belt out screams of delight over your newly purchased home, you still need to complete the closing. During this last stage of the home buying process, you will receive documents that list important information about the purchase, including a detailed list of costs. These expenses are on top of the down payment less escrow money required at closing. Heads up: the total cost at closing may amount to 3-5 percent of the purchase price.

This list of fees is collectively known as “closing cost” or “settlement cost”, which you need to bring during the closing meeting in the form of certified or personal check. Note that the final closing costs may be higher than the “good faith estimate” given by the lender, primarily due to title expenses or attorney fees.

Enlisted below are the standard fees included in the closing costs. Some of these fees may not be applicable in your area. As the buyer, you may strike a deal with the seller to split the closing costs.

COMMISSIONS

This is payment for services rendered by the real estate agents, both for the buyer and the seller. All commissions are paid during the closing. This is not included in the “good faith estimate” provided by the lending company.

Amount: Roughly 6 percent. The usual practice is split between buyer’s and seller’s agent at 3 percent each.

Who pays: Standard practice is for the seller to pay, unless the state where the property is located has other laws different from the usual. It’s also possible that the buyer agrees to pay part of the agent commissions, although this must be reflected in the purchase and sales contract.

GENERAL LOAN FEES

Loan Origination Fee


Upon approval of your loan, lenders will charge you up front for this, to cover administration expenses. Some loans do not require the borrower to pay a loan origination fee.

Amount: Not lower than 1 percent of the loan amount. Some lenders call this a “point”, where each point is equivalent to 1 percent.

Who pays: Buyer, in most cases. However, some areas allow the seller to shoulder half.

Loan Discount (Points)


Lenders or mortgage brokers charge a one-time fee to decrease the monthly mortgage payment by lowering the interest rate on the loan. This is called loan discount (or sometimes termed as “discount point”), wherein the borrower can pay for more points up front in order to reduce the interest rate.

Amount: Varies

Who pays: The buyer usually pays this fee, but the seller may agree to split the bill.

Application Fee


This cost is required by lenders as charge for loan processing.

Amount: $300 on the average, but may reach $500 for some lenders.

Who pays: Buyer

Appraisal Fee


The lending institution will give this amount as payment for an independent appraiser, who will assess your offer price against the appraised value of the home.

Amount: Roughly $300, but this figure may vary depending on the house’s location and size.

Who pays: Buyer

Credit Report Fee


This amount is charged by the lender to obtain your credit report, a document that contains your credit score to provide basis for approval of your loan application. Other lenders call this “credit check fee”.

Amount: On the average, the fee is $25 for every credit report. However, some lenders ask for up to $75.

Who pays: Buyer

Lender’s Inspection Fee


Newly built or constructed homes are subject to inspection by the lender, who will charge you for an inspection fee.

Amount: Not exceeding $100

Who pays: Buyer

Mortgage Insurance Application Fee


If the down payment is lower than 20 percent of the home purchase price, the buyer is required to pay for private mortgage insurance (PMI). This insurance policy protects the lending institution in case the buyer defaults on the loan.

Amount: It may vary from one lender to the other, but some charge additional for processing.

Who pays: The buyer pays for PMI on a monthly basis until the equity requirement of 20 percent is achieved.

Assumption Fee


For purchases where the buyer assumes or takes over an existing mortgage by the seller, the lender usually charges an assumption fee.

Amount: Varies

Who pays: Buyer

Lender’s Attorney Fee


Some lenders prefer a legal counsel on standby, and so this amount will cover payment for the services of the lender’s attorney.

Amount: Estimated at $400

Who pays: Buyer. You may try to refuse this fee, because some lenders may agree to simply drop this charge.

Advance Loan Fees


This payment may be required from the buyer during the closing stage.

Amount: Varies

Who pays: Buyer

Interest


Many lending companies ask for payment of interest to accrue on the loan between the settlement date and the first due date for the monthly amortization.

Amount: Typically ranges from one to 30 days’ worth of interest

Who pays: Buyer

Mortgage Insurance Premium


Although some lenders ask for the payment of mortgage insurance premiums upon closing, others require an upfront payment for the first year of the premium.

Amount: Varies

Who pays: Buyer

Hazard Insurance Premium


This premium pays for an insurance policy to protect the lender against property loss due to fire or other natural calamities.

Amount: One year’s worth of premium for hazard insurance coverage

Who pays: Buyer

Flood Insurance Premium


Buyers of homes in flood-prone areas may be required to take out a flood insurance policy.

Amount: Varies

Who pays: Buyer

Earthquake Insurance


In the same fashion as flood insurance, an insurance policy may be required for purchase of homes in earthquake fault lines.

Amount: Varies

Who pays: Buyer

Reserve Account Funds


The lender may require a deposit for a reserve or escrow account to cover payments for homeowner’s insurance and property taxes. In some instances, the lender will even require advance payments at closing to ensure sufficient funding in the reserve account.

Amount: Varies

Who pays: Buyer

Homeowner’s Insurance


Amount: Usually 2 months’ worth of policy premiums

Who pays: Buyer

Mortgage Insurance


Amount: Roughly 2 months’ worth of premiums

Who pays: Buyer

City Property Taxes


Amount: Two months’ worth

Who pays: Buyer

County Property Taxes


Amount: Two months’ worth

Who pays: Buyer

Annual Assessments


For condominium unit purchases, some lenders incorporate annual assessments from the condominium administration or homeowners association.

Amount: Two months’ worth

Who pays: Buyer

TITLE CHARGES

Title Search


The lender will conduct a title search to check for any unpaid property taxes or mortgages.

Amount: Between $200 and $400

Who pays: Negotiable

Title Insurance Fees


This insurance policy protects the buyer from unclean property titles. A similar provision may be incorporated by the lender in the closing documents.

Amount: $350 on the average, but properties in some states can reach up to one percent of the loan amount.

Who pays: Buyer

Documentation Preparation Fee


This fee covers the processing and preparation of legal papers, but it’s possible for buyers to request that this be taken out of the costs. In fact, this disposable cost is sometimes termed as “junk fee”.

Amount: About $200

Who pays: Buyer, but may be removed by request.

Notary Fees


This expense is paid to a licensed notary public who will issue a sworn testimony to confirm the identities of the people involved in the purchase contract and other documents.

Amount: Varies

Who pays: Buyer

Attorney Fees


This amount is paid to either an attorney who handles the closing or an attorney that will help the lender review documents.

Amount: Varies

Who pays: Buyer

GOVERNMENT RECORDING AND TRANSFER CHARGES

Recording Fees


Recording of the sale in public records is required, and will incur fees.

Amount: About $100 on the average

Who pays: Buyer, in most cases

Transfer Taxes


This fee is required in some states, partly to cover the purchase of tax stamps.

Amount: Varies

Who pays: Buyer

MISCELLANEOUS SETTLEMENT CHARGES

Survey


This fee is required by some lenders who conduct a property survey.

Amount: About $1,000

Who pays: Buyer

Pest Inspection


Some lenders ask for payment to inspect the home for presence of pests.

Amount: Varies

Who pays: Seller, in most cases

Lead-Based Paint Inspection


This fee will pay for a professional who will assess the house for presence of lead-based paint.

Amount: Varies

Who pays: Buyer, in most cases

Courier Fee


If the purchase process needs courier services for document pickup and delivery, a fee must be paid.

Amount: Varies

Who pays: Buyer

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