Buyers Closing Cost
Below is a MRR and PLR article in category Finance -> subcategory Other.
Understanding Buyers' Closing Costs
Overview:
When purchasing a property, buyers incur closing costs that fall into two main categories: nonrecurring and recurring. Let's explore what each entails and what you can expect as a buyer.
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Nonrecurring Closing Costs
These are one-time charges paid when the escrow closes. Here's a breakdown:
1. Loan Origination Fee: This covers the cost of processing a loan and is usually a percentage of the loan amount.
2. Appraisal Fee: Appraisers charge this fee to estimate a property's value. For single-family homes, it often starts at $350, while fees for commercial properties are higher.
3. Credit Report Fee: Lenders check a borrower's credit before granting a loan, charging varying amounts for the report.
4. Pest Control Inspection Fee: A licensed inspector examines the property for termites and other potential structural threats.
5. Tax Service Fee: Paid to a tax service company to monitor property tax payments throughout the loan. If taxes go unpaid, the company alerts the lender to protect against tax foreclosure.
6. Recording Fees: These cover the cost of officially documenting the deed, trust deed, and other related paperwork.
7. Notary Fees: Documents need notarization to be officially recorded, requiring a fee.
8. Assumption Fee: If a buyer takes over the seller's existing loan, this fee is paid to the lender.
9. Title and Escrow Fees: These cover the costs associated with title search and brokering the escrow.
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Recurring Closing Costs
These are ongoing expenses that the buyer pays in advance:
1. Hazard Insurance: The first year's premium protects against risks like fire and storms. It must at least cover the loan amount, though higher coverage is advisable if a significant down payment is made.
2. Proration: If the seller prepaid taxes, the buyer reimburses the seller for the unused portion.
3. Tax and Insurance Reserves: Also known as an impound account, it covers taxes and insurance in monthly loan payments. Depending on timing, the lender might require prepayment of 1-6 months’ worth of taxes and premiums. This reserve account ensures the lender can pay these bills on your behalf.
4. Interest Before First Loan Payment: Depending on closing dates, interest might need covering before the first official payment.
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Understanding these costs can better prepare you as you navigate the home-buying process, ensuring a smoother transaction and avoiding surprises at closing.
You can find the original non-AI version of this article here: Buyers Closing Cost.
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