If you pay less than 20% down you will need to pay monthly for mortgage insurance, the first installment of which will be added to closing costs. The cost of mortgage insurance can vary widely but will generally cost you over $100 per month. When you get your loan make sure that once you have paid 20% of the cost of the house, meaning you have 20% equity in the home, that your mortgage insurance will end. [2] X Research source
Some lenders may also charge for providing a specific interest rate. This charge is a set percentage of the loan amount and therefore is referred to as the number of “points” the lender will charge. A charge of 1 point would be equal to 1 percent of the loan amount. [3] X Research source
The title company used is usually determined by the lender. If you have a strong preference, however, ask your lender if they would be willing to work with the title company you want to use.
This appraisal is likely different from the tax assessor’s appraisal
You can request a copy of your credit report, complete with score, for about $15 per bureau. Question your lender if their charge greatly exceeds this amount.
Make sure, when you are comparing insurance policies, that you consider all the terms in each proposal and not just the annual cost. Homeowner’s insurance should include coverage for loss of the building, personal possessions and contents and liability. Ask about provisions for loss of use and the cost to rebuild any and all existing structures.
Government recording fees also vary by location and are paid to record your title with the appropriate government offices as part of your buyer closing costs. A flood certification is required by lenders in some cases, adding to the buyer closing costs. Your lender may require additional flood insurance if it reveals that the property in question lies within a flood zone. A property survey is required for some real estate transactions. The survey shows you exactly where your property lines are. Most lenders and brokers can recommend reputable survey firms or professionals. There are a variety of other tests you can do on a house, once your offer has been accepted. While most of these, such as radon tests or sewer scopes, are paid for by you upfront, some others may be negotiated into the closing costs.
Your initial escrow deposit should include enough to pay for any taxes that will come due in the current year (the seller will pay you for unpaid taxes for the part of the year you did not own the house, if any, so this will be reimbursed to you), two months of property taxes, and two months of homeowner’s insurance. Taxes are paid in arrears, meaning that you pay after the charges are incurred, but homeowner’s insurance is paid in advance.
If you don’t understand any of the charges outlined in the Good Faith Estimate you should feel free to ask your mortgage lender about them. Some of the fees that go directly to the lender, such as the origination fee, may be negotiable. It doesn’t hurt to try to lower it, the worst that can happen is that the lender will say no.
If the buyer and seller each have their own agent, the fee is split between the two. The buyer of your home will not pay their agent directly, you will.
Home warranties are relatively inexpensive, especially for the benefit provided. In a weak housing market, where people are having a hard time selling their homes, this may be a good incentive for a buyer to purchase your home.
Many states, lenders, and mortgage programs have specific rules and guidelines concerning seller closing costs. Some limit them to a small percentage of the purchase price. You may be able to work out a mutually beneficial situation with the buyer, depending upon which party has more upfront cash to work with and the state of the housing market in your area.
