Once you have finally chosen the house you want to buy, a landslide of events will occur that can normally be very frustrating to you, the buyer. Unfortunately, buying a home is not just about picking out the one you want. Now it includes finding the right home, negotiating the right price, making sure all the inspections have occurred, and that your best interest is taken into account. After all this occurs then you actually get to move into your new home.

As you can imagine, whether this is your first time buying or your 100th time buying, each experience has the potential to be stressful because each time you buy is going to be under a different set of circumstances.

Closing and all associated costs are just one factor of buying a home that is filled with potential mishaps and misunderstandings for the potential buyer. We are going to discuss that today in hopes of giving buyers a better understanding of closing costs. We will explain why you are paying them and what you are paying exactly.

Keep in mind that not all these closing costs will necessarily be your responsibility. As stated earlier, each sale is different. Sometimes a buyer will negotiate and get the seller to pay the closing costs, sometimes the buyer will split them, or maybe you are paying them all but not every one of these fees will apply to your specific sale. The point of listing them all is that you are aware of each possible cost and therefore are the most prepared on the day of your closing.

When you are going to close the deal on your new home you should have received a good faith statement from your lender before hand. This statement should explain to you what is known as your settlement costs. These costs are your closing costs. They will be what you initially pay to close the deal on your home and to be able to take possession once and for all.

Once you know the total for the closing costs you will need to get a check, which will be made out to the lender for the amount on your statement of faith. To make sure everything goes smoothly it is best to assume that you should bring a cashier’s check. The main reason for this is that these checks are as good as bringing cash into the closing, yet they give you a receipt of payment, and the lender will not have to wait for any banking lag to cash these checks. It is the most convenient method of payment for everyone and the majority of lenders require cashiers checks.

The title company or the lender will have explained to you all the associated costs that you will be paying on the day that you will take possession of the home. These fees will obviously all vary based on the home and personal situation, though we will briefly discuss each situation below.

Down Payment

This fee will obviously depend on what you have agreed upon for your own situation. On some occasions you will go to closing and have no down payment to pay. Other times you will pay a large amount in order to minimize payments and have a lesser amount of years to pay on your home. This will be discussed and agreed upon before you get to closing as it will be one of the things discussed with your lender before you are approved for your loan and settle on which home you wish to buy.

Loan Origination Fees

Loan origination fees are involved for each closing. They can vary slightly depending on the company and the size of the loan, but ultimately some form of payment will be required for these.

Points, Loan Discount Fees, or other Low Interest Rate Costs

Points are available for most mortgages though they may not be necessary for you. Normally you take points, which equal money, in order to pay either lower interest for a certain time or you pay a lower down payment. Depending on how long you plan to keep your home, this plan may not be in your best interest. You will want to base this decision on how long you plan to keep your home and the discussions of your goals that you have with the lender you choose to do business with.

Appraisal Fees

Every home that is being put on the market should have an appraisal and depending on the area you may be required to have one. This ensures that the buyers are paying a fair price for the home and that it is around current market value. This may or may not be a fee that a buyer has to pay. Many times buyers and sellers will make agreements to split closing costs or that sellers will pay them specifically.

Credit Report

This is one of the most common costs you will incur. Generally you will have your credit report run when you are seeking pre-approval for the home buying process. What the credit report tells them will help determine how much you should be able to afford when purchasing a home.

Note: Just because you are pre-approved for something it does not mean that you will be able to get a mortgage for that exact amount. Pre-approval is a brief process and it does not involve enough information to give an accurate result. Only once you are submitting forms for a mortgage or speaking in-depth with lender will you know the amount you will be able to borrow.

Private Mortgage Insurance Premium

When you decide on a new home you will have the option of getting something called Private Mortgage Insurance. Like most insurance options, your first payment will be the premium. Private mortgage insurance gives you the option of getting into your home faster and possibly paying a lower down payment.

There are also some other less common fees that may be charged to the home buyers.

Some of these additional fees include:

• Title Insurance Premiums
• Survey Fees
• Deed Recording Fees
• Insurance and/or property tax escrow
• Inspection Fees
• Notary Fees
• Prorated utility costs

Depending on your exact situation you may have additional costs or you may not even pay anything for your closing at all. It really depends on your situation, though these are the most common costs.

If you have any questions or need assistance with your particular situation please do not hesitate to contact me. If you do so, I will be able to provide you with some free information at no cost or obligation.