#ForgetMeNotFriday – April 14, 2017
Closing Costs
Closings costs are generally referring to the costs of borrowing the money. Closing costs include lenders fees – like origination fees, credit reports and appraisal fees. These are all costs that are the responsibility of the buyer. There are other fees involved with the purchase of the home. There are property taxes that are charged on the market value of the property.
A good faith estimate, referred to as a GFE, must be provided by a mortgage lender or broker to a customer, as required by the Real Estate Settlement Procedures Act (RESPA).The estimate must include an itemized list of fees and costs associated with the loan and must be provided within three business of applying for a loan.
In Georgia, it is often customary for the seller to contribute toward closing costs. While the closing costs are the responsibility of the buyer, the seller who really wants to sell his house, will offer some assistance. Closing costs often feel like a tax upon the purchase of a home.
Homeowners insurance policy is required by the lender, because they have the most value at risk. This is considered a part of closing costs.
Mortgage Insurance is an insurance also required by the lender when the loan to value is more than 80%. This is also referred to as PMI (Private Mortgage Insurance) or MIP (Mortgage Insurance Premium). PMI is financed into the loan and added to the monthly payment.
Daily Interest on your loan is paid in the rears, so they will collect the amount needed to cover the daily interest from closing until your first payment is due.
Title Insurance is a form of indemnity insurance, which insures against financial loss from defects in title to real property and from the invalidity or unenforceability of mortgage liens. Owners Title Insurance covers the owner of the property against boundary disputes and previous liens. The Lender Title Insurance will be required by the lender to protect their interests in the property.
Courier fees are the costs of delivering the proper documents to and from the lender and to the attorney for the closing.
Recording fees are the costs of properly and officially recording the documents with the local authorities after the consummation of the sale.
Flood Certification Fees are the costs of having the property certified that it NOT in a flood zone according to the FEMA (Federal Emergency Management Agency). Federal Law requires special flood insurance on any property located in a flood zone.
Wire Fee is the cost of wiring the money from the buyer to the escrow account of the closing attorney. There is often a wiring fee to wire the funds to the lender holding the mortgage on the property.
Home Warranty is a contractual agreement provided to an owner of a house for repairs related to owning a home. It generally covers appliances and systems inside the home. It can cover the roof, HVAC, plumbing and more.
Clear Termite Letter is often required to guarantee that the home does not have termites. This inspection and warranty is done by a trained, bonded and insured pest control expert to verify that the home does not have wood destroying termites that can destroy the infrastructure of the home.
Home Inspection is done by a licensed home inspector and is usually hired to verify the condition of the home; it’s systems and infrastructure. This process is completed most often during the due diligence period of the contract. The cost of this process varies among inspectors.
Credit Report Fees are the expense related to the lender pulling the credit reports of the buyers who are borrowing the money. This is part of the application process that the lender uses to determine the risks involved with loaning money for the buyers to purchase a home.
Property Taxes are taxes assessed on real property, which are usually payable at a specified date annually. Since all but a tiny fraction of real estate transactions close on a date other than this one specified annual date, most transactions must include an adjustment to assure that both the seller and the buyer end up paying their share of the annual property tax, proportionate to the percentage of the year that each has ownership of the property. This is all taken care of at the closing.
HOA (Home Owners Association) Dues are assessed by specific neighborhoods on each property owner to pay for maintenance and upkeep of specific amenities and common areas in the neighborhood. Since the ownership of the seller and buyer are each fractional in the year of the transaction, there must be an adjustment made so that each owner pays their proportional share.