You’ll likely be
responsible for a variety of fees and expenses that you and the seller will
have to pay at the time of closing. Your lender must provide a good-faith
estimate of all settlement costs. The title company or other entity conducting
the closing will tell you the required amount for:
•
Down payment
•
Loan origination
•
Points, or loan
discount fees, which you pay to receive a lower interest rate
•
Home inspection
•
Appraisal
•
Credit report
•
Private mortgage
insurance premium
•
Insurance escrow for
homeowner’s 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
•
Title insurance
policy premiums
•
Land survey
•
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 five 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.
Reprinted from REALTOR® Magazine (Realromag.Realtor.org) with permission of the NATIONAL ASSOCIATION OF REALTORS®