First time homebuyer's guide to closing costs
Monday, 13 November 2017
There are lots of steps along your journey before you get to spend the first night in your dream home: A pre-qualification so you know what you can afford, the hunt, the offer, and the acceptance of the offer.
Payment of the closing costs is one of the final stops—these are settlement charges for anyone who touches the mortgage transaction, such as the loan underwriter, appraiser, and recording clerks.
Costs can vary, but expect to pay about 3 to 5 percent of the total purchase price of the home, says Viola Solomon, BBVA Senior Vice President and Director of Community Lending Mortgage. And like you would do with any major purchase, before you sign on the dotted line, shop around for the best deal. “I would shop those lenders, and I would at least get three loan estimates so you can see what lenders are charging and you can compare," Solomon says.
The costs and kinds of fees may vary from state to state, but in general, closing costs can include:
- An appraisal fee to make sure it's in line with the neighborhood market.
- A charge to pull your credit report to help gauge credit-worthiness.
- The closing /escrow fee , which is paid to the title company for overseeing the purchase and transfer.
- A title search to detect any liens or other murky ownership issues.
- Title insurance to help protect you in case there are undisclosed issues with ownership.
- The survey fee to make sure property lines and boundaries are correct.
- Flood determination to determine if a home is in a flood zone and if you need flood insurance.
- Courier fee to transport documents.
- An escrow deposit for taxes and property insurance.
- Title transfer taxes, which is a government transaction fee
- Recording fees to pay for the new legal record of the title and transaction.
- Processing fee to cover the cost of your application and transactions made by your lender.
- Underwriting fees to pay for the lender 's research of your creditworthiness as a buyer.
- Loan discount points, which is interest paid in advance of the loan, which lowers the cost overall.
- Property tax to a local jurisdiction
Just like with any other contract, it's important to have a full understanding of what you're signing. If there's anything on your closing statement you don't understand, ask and keep asking until it's clear.
The content provided is for informational purposes only. Neither BBVA USA, nor any of its affiliates, is providing legal, tax, or investment advice. You should consult your legal, tax, or financial consultant about your personal situation. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of BBVA USA or any of its affiliates.
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