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LESSON 22: CLOSING COSTS REVIEW
We've talked a lot about the closing process and all
of the things lenders have to do after approving an application.
But how much does all of this stuff cost? It depends on a number
of factors.
In most cases, closing costs will total about 3 percent to 5 percent of your loan amount.
You may have paid an application fee at the beginning
of the whole loan process. These fees run anywhere from $25 to $50
if they're just for pulling credit
reports on up to $250 or $300 if they include the property
appraisal. In many cases, home buyers will already have put
down a portion of the down
payment as an earnest
deposit, too. But the remainder of the closing costs will be
paid (surprise, surprise) at closing.
FOUR MAIN CATEGORIES OF FEES:
1) Lender fees
These include charges for document preparation, underwriting
and origination.
2) Third-party fees
These include charges for title
searches, flood
certifications and appraisals.
3) Government fees
These iclude fees for recording the mortgage and other state
and local mortgage taxes.
4) Escrow/Interest fees
These include advance payments into an escrow
account for homeowners
insurance, real
estate taxes and loan
interest.
See
Tip 1
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Homeowners' insurance policies
can either be "replacement cost'' or "actual cash
value.''
With replacement cost, a 20-year-old camera destroyed in a
storm will be replaced with an equivalent new model, while
cash value coverage would leave a homeowner with nothing because
the item has lost its value over time.
Owners of newer houses and furniture should consider cash
value policies, while owners with older dwellings and contents
may benefit more from replacement-cost versions, which are
generally 10 percent more expensive.
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