What Are Closing Costs?
The professionals at Robbie Breaux & Team have helped you locate that perfect Lafayette townhome, the seller has accepted your offer, your mortgage has been approved and you're eager to move into your new townhome. The last step in this process is called the "closing".
Closing on a home usually means there is a "settlement statement". The settlement statement is a part of the closing process where the ownership of property is transferred from the seller to the buyer. Closing can be tedious, with lots of paperwork. Some of that paperwork may have to do with closing costs. Closing costs usually appear on some type of settlement statement.
Here are some closing costs and what they mean:
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.
Contact the Robbie Breaux & Team to find out which fees and how much you might pay during the closing of that new home. Keep in mind that you might have the option to negotiate these costs with the seller during the offering stage. Ask your Robbie Breaux agent for advice!
