Closing Costs

Especially, as a first time buyer or seller, people do make mistake budgeting for the house they can afford, forgetting about closing costs. Today I would like to touch base what closing costs are and what usually seller and buyer responsible for.

Depending on how strong the market is for sellers and buyers and how well your negotiation goes on, you can ask pther party to pay for your closing costs. Keep in mind though, it may no be always beneficial, so please call me if you consider doing that...

Please keep in mind that numbers below are only estimates, and they may depend on your agent and Title Company. I recommend my clients no matter if it is Buyer or Seller to call around and choose the best Title Company out there.

What Closing Costs Seller usually responsible for and why?

As a seller, you final paperwork should look something like this:

Contract sales price: let's say $275,000
minus closing costs-------about ??
minus paying off the mortgage(s) you have
minus (adjusting items you have not paid for)....let say you are closing on June 04, county taxes are due once a year in Utah, so final amount will get adjusted, in other words you would be responsible for county taxes from January 01-June 04 (assuming June 04 is recording date)

All of this is pretty easy except what is closing costs?

1. Seller is responsible for commissions, seller would pay for Buyer's and Seller's Agent. This number should not be a mistary because if you are a seller, you should already have agent agreement which discussed how much it is...
2. That Title company would charge settlement or closing fee, usually about $75-100
3. Title Company would also charge document preparation free: about $25-35
4. Seller is responsible for Owner's Coverage. In other words, Title company at seller's expense buys insurance which covers Lender and Buyer/Future Owner covers from any undiscovered liens, claims, house upgrades with no city permit, etc. It is not an option item for seller, it is a requirement for seller to purchase. If you house costs $275,000, you are looking at about $900
5. and, lastly recording fee- to make sure you would be removed as a owner of this property-$20.00

What Closing Costs Buyer usually responsible for and why?

As a buyer, you final paperwork should look something like this:

Let's say you contract price is the same: $275,000
minus closing costs-------about ?? about $8,000
__________+
so the gross amount due from Borrower/Buyer is now $283,000

Then amounts paid by or in behalf of the buyer will be deducted:

such items as Deposit or Earnest Money (so here, you would see that your deposit did not get lost it simply became your downpayment)
principle amount of your loan
2nd loan if you have one
again, because county taxes are paid only once a year, and you did not live in the house from January 1 to June 4-you will receive this prorated amount as a discount

This is how Title Company calculates how much many you would need to bring...

Again, All of this is pretty easy except what is closing costs, what is $8,000 in this case:

1.Loan Origination Fee, this amount is traditionally 1% of you loan amount and is payable to your Mortgage Company. It should not be a mistary, and you should know up front how much moeny your mortgage person is planning to charge.
2. Whoever is providing you mortgage may also charge such items as tax fee, processing fee, underwritting fee, flood certification fee, appraisal review fee, assignment fee, courier fee...please get a good understand what and why these fees are charged...Appraisal and Inspection Fees, if you did no pay them yet, will be charged here
3. Now, let's sy again you are closing/recording on 6/04. Your first payment will not be due most likely until 7/01. So, your interest rate proration will be added to you, in othr words, based on your interest rate, it is calculated that it is about $37 a day, so you will be charge about $980, from 6/05-7/01
4. Harzardous Home Insurance: I recommend you shop around or ask your existing car insurance for discount if you do both car and huse with them. Your Home Insurance will be added here, about $650, let's say
5. Then the lender may request some reserve to have money at all times for such things as 2 months of hazard insurance at all times, some months of county property taxes, mortgage insurance, etc.
6. Now, title charges: Settlement/Closing fee $125, document preparation $35
7. If you are a cash buyer, you would not be resposible for the next, highest number: Lender's Coverage. If you borrow money, you are required to buy this Title insurance which is described above.
8. Wire and Courier Fee to Title Company
9. Recording fee- to make sure you are certified as a new owner of the property

As a side note to remember, most of thi fees are the same if you refinance the house, so please remember to do the refinancing only if it is beneficial.