Once your offer is accepted, you’re one step closer to your new home. But whether you’re buying a house in Cobb County, Fulton County or anywhere else in the Atlanta metropolitan area, first comes the closing process and closing costs. It’s important to know how much these fees will be and where your money, or hopefully the other guy’s, is going.
Closing costs are the additional fees above and beyond the interest and principal that are attached to getting a mortgage loan. They are typically paid to the lender or a third party. When added together, these fees average between 2 and 5 percent of the cost of the home. So if you’re considering a $200,000 home, closing costs will likely be between $4,000 and $10,000.
When you apply for a loan, the lender will provide a Good Faith Estimate of how much closing costs will run. This is required by law and should be provided to you within three days of your application.
When broken down, you can expect to pay:
- Loan origination fee. When you apply for a loan, lenders charge you for the work involved in processing the paperwork.
- Credit report. Another thing lenders will do when you apply for a loan is run your credit report to determine if they’ll lend you the money, how much, and at what interest rate.
- Points. If you purchase points on your loan — in other words, a fee paid to lower your interest rate — the cost will be part of your closing fees.
- Inspections. This involves pest inspection to make sure there isn’t any damage to the house in the form of dry rot or other infestation. It also includes any other inspection the lender requires.
- Appraisal fees. The lender will require an appraisal of the home you want to buy to ensure the loan is the appropriate amount and that you’re not paying too much for the house.
- Survey fee. This shows the property boundaries and any encroachments or easements. This is required by the lender.
- Title search. A little digging needs to be done to make sure there aren’t any unpaid mortgages or tax liens on the property.
- Title insurance. This protects the lender in the event the title isn’t clean.
- Recording fee. This is a fee required for the local jurisdiction to make the transaction legal and public. Local officials will put the transaction into land records.
- Escrow deposit. You usually need to pay several months’ worth of property taxes and private mortgage insurance (if your down payment is less than 20 percent) up front. This will go in your escrow account.
- Attorney’s fees. The legal experts involved in the transaction will charge for their services.
- Underwriting fee. This covers the cost of evaluating a mortgage loan application.
The best thing to do to understand closing costs and reduce them as much as possible is to work with a real estate agent. He or she knows how to save you money and get you into the house of your dreams. Closing costs are part of the transaction, and therefore negotiable. You might pay them, the seller might pay them or you both might split them. Having a real estate professional proficient as a buyer’s agent will give you an expert on your side to help keep your costs to a minimum.
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