The term “closing costs” accompanies any real estate transaction. When you’re preparing to purchase your first home, closing costs can be confusing. Closing costs cover the services required to complete the purchase of your house, and are typically covered by the buyer at the completion of the transaction. However, in some cases, closing costs can be negotiated to be paid completely or in part by the seller. Use this closing cost guide to help you on your journey to understanding the home buying process.
You can estimate closing costs to range between one percent and eight percent of the value of the property you’re buying. Furthermore, closing costs are not generally covered in the home mortgage loan, which means you’ll be paying out-of-pocket when you collect your keys. Here are some of the items enveloped in the term “Closing costs.”
Lending Fees
To buy a home, you’ve likely obtained a home mortgage loan. Although your interest rates and mortgage fees are figured into your monthly payments, the person who processes your application also receives a fee. The fee the lender receives for processing your application is paid at the end of the transaction, separate and apart from your mortgage payments and interest.
Credit Report Fees
To determine whether or not you qualify for a home mortgage loan, your lender will order credit reports from the major credit reporting agencies. Each agency charges a fee for the report they provide to the lender.
Clerical Fees
Before a house can be legally sold, the title must be checked and verified to be free of any tax debts or liens. Upon obtaining a clear title, that title must then also be transferred from the seller’s ownership to the buyer’s. Not only are clerical fees included for preparing the paperwork, but there may be additional fees charged by the city for transferring the title.
Appraisal Costs
The bank needs to verify that the house you’re buying is worth what you’re borrowing. To accomplish this, an appraisal must be performed on the property prior to closing. The appraisal takes into account the size, condition, and style of the property, as well as any upgrades or additional features such as landscaping or swimming pools. Other information applied during an appraisal is the value of surrounding houses in the neighborhood. If the appraisal comes back showing a discrepancy in value, the contract is open for negotiation.
Inspection Costs
To protect the buyer, an inspection is ordered to establish the condition of the house being sold. The inspection checks for termites or pests, malfunctioning systems such as heating an air, the condition of materials such as roofing, as well as electrical and plumbing systems. In the event that problems are found with the inspection, the buyer can request a reduced price on the property to accommodate repairs, or can request the seller repair these items before close of sale.
Survey Fees
In some cases, a surveyor is called upon to survey the property lines. This is especially true in rural areas or in areas where property lines may be in question.
Attorney Fees
In some cases, an attorney is employed to review the documentation in the contract.
HOA Transfer Fees
If the seller lives in an area governed by a homeowner’s association, the membership to that association must be transferred from the seller to you.
Escrow Fees
In most real estate transactions, an escrow agent takes part in processing funds. The escrow agent is a third-party service that holds and disperses funds accordingly. It is the escrow agent that arranges for payments to the appraiser, inspector, lender, clerks, agents, and other service providers.
Real Estate Agent Commissions
In most cases, the buyer and the seller each have individual real estate agents. Although it can be argued that either the seller pays commissions on both, or the buyer pays commission, the truth of the matter is that all commissions are dispersed out of the proceeds at the close of sale.
Not every real estate transaction will include all of the closing costs mentioned above. Other items may be required that are not mentioned here. Each service provider has the right to price their services, so costs for each service may vary. Talk with your real estate agent in-depth for a thorough understanding of closing costs.
Your real estate agent is the best source of information about the local community and real estate topics. Give Ocala Realty Experts a call today at 352-254-5255 to learn more about local areas, discuss selling a house, or tour available homes for sale.
