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Prepaid Closing Costs

By Daren Newman - Broadway Capital Group

Buying a home involves more out-of-pocket than just the down payment. There are also closing costs to pay for items such as title policies, recording fees, inspections, courier charges, reserves to set up an impound account and fees that a lender charges. It is the fees a lender charges to make a loan that typically cost the most. Closing costs are on top of the purchase price.

How Much Are Closing Costs?

As a rule of thumb, closing costs to buy a home run about 2 to 4 percent of the purchase price. Much depends on the points and origination fees a lender charges to make the loan, which are disclosed on the buyer's Good Faith Estimate.

Non-Recurring Closing Costs

Fees that are paid once and never again are called non-recurring.

These fees are one-time charges for such items as:

• Title Policies

• Escrow or closing

• Notary

• Courier / Delivery & Wire fees

• Endorsements

• State, County or City Transfer Taxes & Recording

• Home Protection Plans

• Natural Hazard Disclosures

• Home Inspection

• Lender fees paid in conjunction with the loan on the HUD-1, line 800.

Recurring Closings Costs - The Prepaids

Recurring fees are those charges that you will pay again and again. They include such fees as:

• Fire Insurance Premium

• Flood Insurance (if required in your area)

• Property Taxes

• Mutual or Private Mortgage Insurance Premiums

• Prepaid Interest

The time of the year that you close will dictate how many prorata months of premiums the lender will collect to hold against future payments of taxes and insurance.

Can a Seller Credit the Buyer for Closing Costs?

• If you are financing 100% of the purchase price, the lender might limit your credit to 3% of the purchase price.

• Depending on your FICO score and the amount of your down payment, the lender might allow a seller to credit you as much as 6% of the purchase price.

• Lenders will not let a borrower receive cash from a seller at closing, regardless of what you may hear at those no-money-down seminars.

Condo - Townhome Homeowner Associations

Buying a condo or townhome is about more than four walls and interior air space; it also means buying the homeowner association. Smart buyers examine all the homeowner association documents, including its latest financial statements, to determine if one is buying into a money pit or a gold mine. >>

Determining a Buyers or Sellers Market

When most people decide to sell or buy a home, very few stop to take the temperature of the marketplace or wonder if the market is conducive to the goals at hand. That's because most folks tend to think of their home as a place to live and not as an investment. Then there are Californians, for whom real estate seems to be a secondary, if not primary, religion. >>

Do You Need Title Insurance

Because buyers are involved in recording deed transfers and plotting land parcels, a lot can go wrong. You want title insurance because it will protect you against defects and human error. >>

Inspecting the Attic

Although inspecting attics is rarely foremost on a buyer's mind, there are a lot of good reasons why buyers need to get into an attic or send their home inspector into the attic before completing a home inspection. Attics should not be overlooked. An attic reflects the history of a home. It can provide clues to serious problems that might not be disclosed or even known by the current occupant of the home. >>

Reasons to Buy a Home

If you're like most first-time home buyers, you've probably listened to friends', family's and coworkers' advice, many of whom are encouraging you to buy a home. However, you may still wonder if buying a home is the right thing to do. Relax. Having reservations is normal. The more you know about why you should buy a home, the less scary the entire process will appear to you. Here are seven good reasons why you should buy a home. >>

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