What Are Closing Costs?
Closing costs… That rare and all-inclusive terminology that encompasses everything from courier fees to appraisals and everything in between. Closing costs are the basic fees it cost to buy a home. They include a variety of different fees and you should get a good faith estimate or statement from escrow stating everything that's involved in the closing costs. They should be as close to that figure as possible and if there's any change in closing costs. Be sure to ask your real estate agent, lender, or escrow officer.
Below are some of the most common closing costs. Again, fees can range anywhere from a $10 courier fee up to a $5000 mortgage officer fee. Many of these fees can be built into the purchase of the property or the seller can pay for these fees, especially if you are buying a VA loan home. There are a lot of creative financing options for first-time homebuyers as well as grants and homebuying assistance programs that can cover the cost of a lot of closing costs.
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.
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.
Loan Origination Fee: This fee covers the lender's loan-processing costs. The fee is typically one percent of the total mortgage.
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.
Title Insurance Fees: These fees generally include costs for the title search, title examination, title insurance, document preparation and other miscellaneous title fees.
PMI Premium: If you buy a home with a low 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.
Prepaid Interest Fee: This fee covers the interest payment from the date you purchases 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.
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. In addition, taxes equal approximately to two months in excess of the number of months that have elapsed in the year are paid at closing. (If six months have passed, eight months of taxes will be collected.)
Recording Fees and transfer taxes: This expense is charged by most states for recording the purchase documents and transferring ownership of the property.
It's also important to note that you can negotiate these fees. Everything is negotiable in a real estate transaction so it won't hurt to ask. If you are shopping around for a home loan, let them know your shopping so that they can give you the best possible offer. If you have other questions feel free to contact us below. We love to help you find the right home in Las Cruces today.