Home ownership is oh so close
You’ve saved and saved for your down payment, even giving up Starbucks (okay maybe just cutting back, no ones perfect right?) in order to afford that dream house. But now your lender is talking about closing costs. Wait…what?? In this article we’ll discuss the different charges associated with closing on a house and the role they play in your purchase.
Why?
Real estate transactions involve a multitude of parties, each of whom will be looking to be compensated for their work. Attorneys, lenders, appraisers, title insurers, and local municipalities all play a role. Some of these costs are incurred by the seller, however a majority will fall on you as a buyer. Below are the largest and most common items to keep on your radar.
Typical Closing Costs
Application Fee: Paid to the lender to process your request for financing.
Appraisal Fee: In order to lend on a property your mortgage company will require a third party valuation of collateral.
Attorney Fee: It’s recommended you hire a real estate attorney. Their role is to review the purchase contract and loan documents, make sure your best interests are protected and help hash out disputes between you and the seller.
Escrow Agent Fee: The party responsible to processing the closing.
Escrow Deposit: If you are escrowing your property taxes and homeowners insurance the lender will require a certain number of months be paid upfront at closing to establish the account.
Homeowner’s Insurance: Plan on paying the first years premium up front. When you think you’ve found a home reach out to your insurance provider for a quote. This way there won’t be surprises when it comes time to close.
Lender’s Title Insurance: Protects the bank from past claims affecting title missed during the initial search.
Mortgage Insurance Premium: Oh how people love mortgage insurance! If you plan on putting down less than 20% then you most likely will be paying mortgage insurance. Depending on the product expect an upfront fee in the range of 0.5%-1.75% of the amount borrowed.
Mortgage Recording Tax: “New York State imposes a tax on the privilege of recording a mortgage on real property located within the state.” That’s straight from the Department of Tax and Finance website. What a privilege. For most parts of Upstate this will be roughly 1% of loan the amount.
Owner’s Title Policy: Not required but highly recommended. Similar to the lender’s policy mentioned above the purpose is to protect against unknown clouds on title. The only difference here is this policy protects you the owner.
Wrap Up
At time of application your lender is required to outline your closing costs in what’s called the Loan Estimate. Review this document carefully. If there is something you don’t understand ask your loan originator to explain. Still unsure? As your attorney or real estate agent. All of these people work for you. Be sure you get your monies worth.
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Considering buying or selling in the Capital Region? Schedule a phone or Zoom call with me here
Steven Luttman
Broker/Owner SJLincoln Realty
35 Bath Street, Ballston Spa NY 12020
(518) 309-8584