Your mortgage lender, real estate agent, real estate attorney, or settlement agent should be in touch with you a few days before your closing settlement with the final amount of money you’ll need to close on a purchase of a home. However, in some cases, the call may come too close for comfort and may be as late as the night before your closing, so you should be prepared well in advance of the type of fees associated with purchasing a home. We refer to these fees as closing costs.
The home buying closing costs you might expect to see include:
Attorney fee: In some states, the lender will require you to close with a real estate attorney. These fees are typically fixed and start around $650 and can go as high as $1,000, but in other parts of the country you may have to pay an hourly rate. You can also hire an attorney for personal representation, prepare the purchase and sales and review all documents in the transaction. This is additional and can range from $250 to $1500 depending upon the services provided.
Flood certification fee: You’ll pay this fee to have your lender determine if your home is in a federally designated flood zone. If it is, your lender may require you to purchase flood insurance before agreeing to lend you money. This will cost on the range of $25 to $50
Lender’s appraisal fee: The lender wants to make sure your property is worth at least as much as what it is lending you. The appraisal fee will vary, depending on the value of the property. In higher-value homes, you may find a lender requiring two appraisals, and you may be required to pay for both of them. Depending on the state in which you are located, the appraisal fee could be as low as $450 for a single family home and as high as $700 multifamily homes.
Lender’s credit report: Your lender will pull your credit report a few times during the loan application process to make sure your financial situation hasn’t changed. Expect to pay $35 to $100 per credit report for each person that has applied for the loan.
Lender’s document preparation fees: The document preparation fee is a charge the lender bills you to assemble and create the documents for your closing. Ever since settlement agents and lenders unbundled their fees, lenders have labeled their services and collected a fee for each. Expect to pay between $695 and $995.
Lender’s Title insurance: The lender wants to protect its investment, so it wants to make sure the property you are buying is insured and remains insured as long as the home has a loan on the property. The lender’s coverage will cost $2.50 per thousand borrowed. When it’s time to refinance, this cost is discounted in many cases to as little as $1.50 per thousand.
Real Estate Tax escrow: In some states, the amount the lender requires of a buyer may be substantial. Taxes are billed quarterly and semi-annual and the lender will want to hold 3 to 5 months in escrow. You may receive money from the seller for bills that come due after the closing if they cover the time the seller owned the property. Like with homeowner’s insurance, the lender will probably require a lump sum deposit from you to the escrow account at closing settlement.
Mortgage point and loan origination fee: The origination fees are tied to the total cost of your loan and can run up to about 3 percent of your loan. If you pay a point, you should be getting a reduction of your mortgage interest rate. Whether you pay points or origination fees may be up to you. If you decide to obtain a loan with a lower-than-market interest rate, you may agree to pay points to lower your interest rate or buy down the rate.
Notary and other fees: Depending on your state, your mortgage paperwork may have to be reviewed and signed by a notary public. The notary public may charge a fee to witness your signature and verify it on the closing documents.
Prepaid interest on the loan: Usually a lender will bill you in advance for the interest on your loan from the day your loan closes to the end of the month. If you close early in the month, the amount will be larger; if you close near the end of the month, the amount will be smaller. This amount will be tied to the interest rate on your loan.
Recording fees for deed or mortgage: You’ll receive title to your home in the form of a legal document, and this document will need to be recorded with your county recorder of deeds. The mortgage will need to be recorded as well. The recording fee will vary from state to state, but you should expect to pay at least $360 in Massachusetts. Additionally, in some states, there is a mortgage tax that is based on the amount of the mortgage. For example, if the mortgage tax is 1 percent and your mortgage loan is for $250,000, the tax will be $250 to record the document.
Owners Title insurance: If you choose to purchase a buyer’s policy, and I absolutely think you should, the cost is $4.00 per thousand based on the purchase price of the home. If you only buy a lender’s title policy and then someone makes a title claim to the property and you lose the house, only the lender will get a check. Plus, if you have equity in the home, that equity will not be protected now or in the future. You need to buy a separate owner’s policy so that you will be fully compensated in this sort of situation.
Additional Items:
Purchase and Sales Review: Most purchase and sales are provided by the real estate agents through the Greater Board of Realtors. It is good to have these reviewed by a real estate attorney and can cost $250 to $500 for this.
Home inspection: While you should have had your own inspector go through the home you are buying early in the home-buying process, this fee will be required by your lender to make sure a newly built home has been completed. Your lender won’t want to fund your purchase unless it has sent someone out to actually see the home and make sure it’s ready for closing. This fee might runs between $250 and $500, depending on the type of new home you’re buying.
For more information regarding closing costs or mortgages, please email me at bill@billnickerson.com
Bill Nickerson, NMLS# 4194
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William J. Nickerson | NMLS #4194 | bill@billnickerson.com | 978-273-3227
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To help make the selling process easier for you, it makes sense to have your home inspected before listing it. It may sound like a hassle but it could save you a lot of money and stress early on. The inspection will pinpoint red flags and areas that have potential problems. It also gives you the opportunity to address those issues before listing your home. Having your home already inspected ultimately also gives the prospective buyers the comfort and confidence that the seller actually cared about their home in the first place. Be sure to share this information with prospective buyers by supplying a copy of the home inspection. It is perfectly okay to choose not to have your home inspected before listing. If you take this route, just be sure to do your own pre-listing home inspection to keep things significantly less nerve-racking and not terribly costly before the buyer’s home inspector comes through.
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