The Scoop on Closing Costs

by Carla Hill
Tuesday, June 05, 2012

There are more expenses to buying a house than just the monthly mortgage payment. More than likely you'll need to come up with some cold, hard cash in order to finalize the deal.

Here are some common closing costs to consider:

Down Payment: Due to today's economic climate, most buyers will need to put down at least 20 percent. This makes good financial sense. If you can't afford to put 20 percent down then you probably can't afford to buy this particular house.

Loan Origination: This is what the lender charges you to underwrite the loan, meaning what they charge for their time and all the paperwork they need to do.

Points: You'll often see that different lenders have different "rates" and different "points" they charge. By paying points, you can receive a lower interest rate, but this means more cash at closing.

Credit Score: You can access your credit report for free at annualcreditreport.com, however, in order to see your credit "score" -- the magic number that lenders use to determine your interest rate -- you'll need to pay a small fee.

Home Inspection: You want to be sure, no matter if the house is new or old, that you get a home inspection by a qualified inspector. You may love the house and the price, but if you find out that a big ticket item needs replaced you will be able to renegotiate the price or decide to change your tune on buying the home. A typical inspection will run you from around $300 to $500.

Private Mortgage Insurance (PMI): This is what a lender charges if you are putting less than 20 percent down on the cost of the home. It usually runs about .5 to 1 percent of the total cost of the loan and is simply a safeguard to protect the lender should you default.

Other Small Fees: Insurance escrow, property tax escrow, notary feeds, land surveys, deed recording, etc. Be sure to ask your real estate agent which will apply to your contract and what the expected costs will be.

Congratulations on the decision to buy! Owning a home can be a wonderfully fulfilling experience. Just be sure you're ready for the closing costs coming your way!

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