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Don’t Let Closing Costs In A Pleasanton Real Estate Transaction Surprise You

Don’t Let Closing Costs in a Real Estate Transaction Surprise You

If you are going to buy a home, you should know the closing costs that are typically involved in any real estate transaction. In some cases, the seller will pay part of the closing costs if you negotiate it and the seller agrees, but there are some things that almost always have to be paid by you as the buyer.

In better market conditions, sellers might have paid part of the fees out of their equity to work with a buyer who was short on the down payment. These days, a larger number of sellers may not have enough equity. Besides, many buyers have had the housing tax credit to help them make the down payment. When this credit expires, closing costs will again be a bigger factor as additional money you as the buyer will need to bring to closing.

Here are the usual closing costs that you will find in a real estate transaction:

1. The credit report fee is the cost to get your credit reports and is normally under $200. It is normally paid when you complete your loan application, but is sometimes carried forward and comes due at closing. Sometimes, the credit report fee can be lumped in with the mortgage application fee, or they may be listed as two separate fees. Either way, you can expect that they will come to around $500.

2. An appraisal fee is to do a professional appraisal of the value of the property. This fee is almost always paid by the buyer. It can vary quite a bit, but is normally under $500. Like the credit report, this fee may be paid when you make your loan application, or it may be included in closing.

3. Title search fees, which can run from around $200 to $400 and serve to make sure you get clear title; and title insurance fees, which is what purchases title insurance. Title insurance is designed to protect against all claims made on the title by circumstances that were not exceptions. This fee is computed on a percentage of the price of the home and can vary, but you can figure it will be about 1% of the price.

4. Loan origination fees and points. An origination fee can be anywhere from 0.5% (half a point) to 2% (two points) of the loan amount. Its purpose is to pay for the cost incurred by the lending institution of providing the services associated with handling and making the loan. Discount points, which are a separate thing entirely, are a percentage of the loan amount paid upfront to buy down the loan rate. This is a pre-paid interest to give you lower monthly payments. You can use points as a variable to get to a level qualifying on an income to debt ratio that the lender will approve.

5. Recording and document fees. These fee are for the recording of the deed in the county that has jurisdiction and some states have a document fee or transaction tax, depending on location.

6. Pro-rated insurance, association fees, property taxes and other recurring costs of ownership are settled based on the portion of the year that the buyer has ownership of the property. Usually, you can expect to pre-pay the first year of insurance, and then the pro-ration could actually end up being a credit that the seller owes you and then you pay the full year’s premium. In some states, the difference may go into an escrow account, in which case your lender might require one year’s tax and insurance deposited escrow in at closing.

These costs and fees are the main closing costs that the buyer will pay at the time of closing. The seller pays the real estate agent’s commission, the seller percentage of apportioned costs and taxes, and any other seller costs and fees that were negotiated in the contract.

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