Common Closing Costs for Buyers
The lender must disclose a good faith estimate of all settlement costs. A check
to cover your closing costs will probably have to be a cashier’s check. The
title company or other entity conducting the closing will tell you the required
amount for:
- Downpayment.
- Loan origination fees.
- Points, or loan discount fees you pay to receive a
lower interest rate.
- Appraisal fee.
- Credit report.
- Private mortgage insurance premium.
- Insurance escrow for homeowners insurance, if being
paid as part of the mortgage.
- Property tax escrow, if being paid as part of the
mortgage. Lenders keep funds for taxes and insurance in escrow accounts as
they are paid with the mortgage, then pay the insurance or taxes for you.
- Deed recording fees.
- Title insurance policy premiums.
- Survey.
- Inspection fees—building inspection, termites, etc.
- Notary fees.
- Prorations for your share of costs such as utility
bills and property taxes.
A Note About Prorations. Because such costs are usually paid on either a
monthly or yearly basis, you might have to pay a bill for services used by the
sellers before they moved. Proration is a way for the sellers to pay you back or
for you to pay them for bills they may have paid in advance. For example, the
gas company usually sends a bill each month for the gas used during the previous
month. But assume you buy the home on the 6th of the month. You would owe the
gas company for only the days from the 6th to the end for the month. The seller
would owe for the first 5 days. The bill would be prorated for the number of
days in the month, and then each person would be responsible for the days of his
or her ownership.
