Closing Costs

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Closing costs in homebuying refer to the expenses that buyers incur during the final stages of the real estate transaction. These costs encompass various fees and charges associated with finalizing the mortgage loan, transferring ownership of the property, and completing the legal and administrative aspects of the purchase. Typical closing costs include loan origination fees, appraisal fees, title insurance fees, attorney or escrow agent fees, recording fees, and prepaid expenses such as property taxes and homeowners insurance. It's important for homebuyers to carefully review and understand these costs, as they can significantly impact the overall expenses involved in the homebuying process. 

Closing costs typically include:

• A loan origination fee: This is the fee your lender charges for processing and providing your loan.
• Points: One point equals one percent of the loan amount. By paying a point, you are prepaying mortgage interest to your lender, and you get a lower interest rate in return. (Generally, the decision to purchase points is left up to you.)
• A title search and title insurance: Your lender will require you to pay for lender’s title insurance, which protects them against loss in case the title company misses something in their search, but you should also consider purchasing owner’s title insurance, which protects you.
• An appraisal: An appraisal is a determination of the home’s market value. A lender will typically not provide a mortgage for greater than the home’s appraised amount.
• A survey: A survey confirms the legal, recorded boundaries of the property.

Closing Costs: Recording Fee, Mortgage Interest, Escrows

• A recording fee: This is a fee that is charged to record the transfer of ownership in the county or town records.
• Mortgage interest: At closing, you will have to pay the interest that will accrue on the mortgage between closing and the end of the month.
• Escrows: If you will be paying your property taxes, homeowners insurance, mortgage insurance, and/or homeowners association dues through an escrow account you may have to deposit a reserve with your lender. You may also be required to make upfront payments on some of these items.

Payment Method

Choosing the appropriate payment method is crucial when it comes to closing on your home. After carefully reviewing and approving the Closing Disclosure, it is recommended to visit your financial institution to obtain a cashier's check for the specific amount agreed upon for closing. This amount should be clearly stated on the bottom of the first page of the Closing Disclosure statement. It's important to note that personal checks are typically not accepted for this purpose. By obtaining a cashier's check, you can ensure a secure and efficient transaction during the closing process. 

Closing 

Closing, also referred to as "settlement," marks the final stage in completing the home sale transaction. During this significant step, you will sign various closing documents that solidify the transfer of ownership from the seller to you, the buyer. The closing typically takes place either at the office of the party handling the closing or, in some cases, a notary public can be sent to your house or workplace for convenience. 

You have the option to attend the closing either alone or together with the seller, depending on your preference and agreement. Prior to the closing, it is essential to confirm the necessary items you need to bring. Generally, you will be required to provide photo identification, proof of insurance on the home (if applicable, both your condo insurance policy and the condo association's insurance policy for the structure), and a cashier's check covering the amount due for the down payment and closing costs. The closing process typically takes around one to two hours, and you will be required to sign numerous paperwork. It is vital to thoroughly understand the contents of each document before signing them, ensuring a clear comprehension of your rights and obligations.

End of Lesson 2:

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