Las Cruces Real Estate | Homebuying-101: Closing
You've found your dream home, the seller has accepted your offer, your loan has been approved, and you're eager to move into your new home. But before you get the keys, there's one more step called the closing. Continuing with our Homebuying-101 series, today we’re going to discuss the closing process and what all is entailed in your closing costs.
Also called the settlement, the closing is the process of passing ownership of a property from the seller to the buyer. As a buyer, you will sign what seems like endless piles of documents and will have to present a sizable check for the down payment and various closing costs.
Many of the fees may vary by locality, here are some common fees:
1. Appraisal Fee: This fee pays for the appraisal of the property. You may already have paid this fee at the beginning of your loan application process.
2. Credit Report Fee: This fee covers the cost of the credit report requested by the lender. This too may already have been paid when you applied for your loan.
3. Loan Origination Fee: This fee covers the lender's loan-processing costs. This fee is going to vary depending on the type of loan that you get, and whether you use a mortgage broker or a lender.
4. Loan Discount: You will pay this one-time charge if you have chosen to pay points to lower your interest rate. Each point you purchase equals one percent of the total loan.
5. Title Insurance Fees: These fees generally include costs for the title search, title examination, title insurance, document preparation, and other miscellaneous title fees. Most of the title fees are covered by the seller, although there are some circumstances when they are covered by the buyer.
6. PMI (Private Mortgage Insurance) Premium: If you buy a home with a lower down payment, a lender usually requires that you pay a fee for mortgage insurance. This fee protects the lender against loss due to foreclosure. Once a new owner has 20 percent equity in their home, however, he or she can normally apply to eliminate this insurance.
7. Prepaid Interest Fee: This fee covers the interest payment from the date you purchase the home to the date of your first mortgage payment. Generally, if you buy a home early in the month, the prepaid interest fee will be substantially higher than if you buy it towards the end of the month.
8. Escrow Accounts: In locations where escrow accounts are common, a mortgage lender will usually start an account that holds funds for future annual property taxes and home insurance. At least one year advance plus two months’ worth of homeowner's insurance premium will be collected.
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If you’ve missed any of our Homebuying-101 series, you can find all of our videos and discussions here.