What goes into closing costs on a house

What goes into closing costs on a house


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When buying or selling a house, additional fees will be paid at closing that go beyond the actual property price tag.  What goes into closing costs on a house?  These websites have very good detailed information that will be compared and contrasted:

https://www.nerdwallet.com/blog/mortgages/cost-to-close-mortgage/ 

and

https://www.thebalance.com/be-prepared-for-closing-costs-1289841

 

Item:                                                     Nerd Wallet:                                       The Balance:

Application fee                                   varies                                                    $75-$400

Credit report fee                                not in the article                                 not stated

Mortgage insurance                          varies                                                   $750-$1,750

Processing/underwriting fee          not in the article                                not stated

Origination fee                                  about 0.5% of loan                            1% of loan

Mortgage broker fee                        range 0.5-2.75%                                not stated

Documentation prep fee                not in the article                                not stated

Discount points                               1 point 1% of loan                              rate $100 to $300 per $10,000

Assumption fees                              varies                                                   not in the article

Upfront mortgage insurance       0.55% to 2.25%                                  not in the article

Prepaid interest                               based on loan                                    not stated

FHA/VA/USDA                              not in the article                                1% to 3.3%

Title search fee                                about $200                                         $400 to $600

Lender’s title insurance                 varies                                                   not stated

Owner’s title insurance                 0.5% to 1% of purchase                    not in article

Property taxes                                 2 months’ worth                                day of settlement to year end

Homeowner’s insurance               depends on home type, etc.            not in article

Hazard premium insurance         not in the article                                not stated

Home inspection                            $300 to $500                                     not stated

Appraisal fee                                   $300 to $400                                     not stated

Recording fee                                  not in the article                                not stated

Wire transfer fee                            not in the article                                not stated

Notary fee                                        not stated                                            not in the article

Tax service                                       not in the article                                not stated

Tax stamps                                       not in the article                               not stated

Pest inspection                                not in the article                               not stated

Attorney’s fees (if applicable)      hourly rate                                         not stated

HOA fees                                          prorated                                             not in the article

Final closing fees                            varies                                                  not in the article

***Disclaimer: This is a variable list only!  Always get final prices from your lender/real estate attorney/real estate closing office or other real estate service that will conduct this transaction.

What goes into closing costs on a house is an extensive list of other fees, actions, and documents.  A property that is paid with cash financing will be a much quicker transaction than a REO property with a mortgage.  Paying with cash means the buyer has 100% of the funds for the transaction verses needing to qualify for a loan.  Also, a REO property typically is sold As-IS which indicates the need for repairs which then will slow down the mortgage underwriting process.

Some of what goes into closing costs on a house will be explained in depth:

  1. Application fee. Filling out this document will ask many questions beyond the typical name, date of birth, social security number, and income.  Someone has to do a credit check, verify income, etc.
  2. Origination fee. Beyond the initial application fee, the Origination fee is for the underwriting team.  This is when loan documents are prepared, perhaps a notary is needed, other real estate professionals may need to be involved, therefore they all need to be paid somehow.
  3. Title search fee. This is a crucial step of what goes into closing costs on a house.    Reel Property Solutions, LLC had a situation where a homeowner stated they had 2 liens to the property: the mortgage and down payment assistance loan.  During the title search, a third lien was found to be placed on the property.  If the title search had not been completed and the property was purchased and closed on, the property would still have that lien which would now be the responsibility of the new homeowner.  This is just one small reason for the title search.
  4. Homeowner’s insurance. When buying a vehicle, the person buying must have proof of insurance when getting the vehicle registered.  This is the exact same concept when purchasing a piece of real property.  The cost of homeowner’s insurance can be incorporated with the mortgage.  PITI is principle, interest, taxes (property taxes) and insurance.  Having the insurance paid every month with one lump-sum ensures the property is protected to the extent of the insurance policy.
  5. Final closing costs. This is all the miscellaneous costs that could be specific to your local government, closing agency, real estate commissions, etc.

What goes into closing costs on a house is something that should be reviewed before setting a budget for the new home.  This is all in addition to whatever down payment amount is required by the buyer.  It’s important to have an open mind and not rush the process or overextend yourself with the house price tag.

Reel Property Solutions, LLC has a spreadsheet to enter information to set a budget for properties.  Being some of the financing could be from private entities, sometimes parts of the closing costs are eliminated such as the loan application fee.  However, utilizing Hard Money Lending (HML) may require more fees such as paying a much higher interest rate due to the short-term nature of the loan.

Although we at Reel Property Solutions, LLC are not experts regarding what goes into closing costs on a house, the education and support from Fortune Builders is there to help!  Therefore, whatever questions we cannot answer, there is someone within a phone call or a few keystrokes away to assist.

Contact Reel Property Solutions, LLC to CATCH A WINNER! 

info@reelpropertysolutionsllc.com 507-218-8788  507-722-1511

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