Ready to buy your first home? But you are wondering what are the basic buyers closing costs? That is an excellent question. It is good to be prepared! No one likes surprises. Generally speaking, the buyers responsibility is related to the mortgage. That is why the buyers closing costs are usually the mortgage closing costs.
Basic Buyers Closing Costs
Here are a few of those costs that are required to obtain a mortgage:
- Loan origination
- Discount points
- Appraisal
- Credit report
- Prepaid interest on your mortgage
- Private mortgage insurance premium
Loan Origination
This is the loan origination fee. This is a fee the lender charges for arranging the loan. This fee is negotiable but is generally 1% of the mortgage amount. Lenders vary in what they charge for this. So it is a good idea to shop to get your best price.
Discount Points
Perhaps you want a lower interest rate than what you can qualify for. This is where discount points come in. Some lenders will offer a lower interest rate if you pay a fee upfront. So do not let the word
discount fool you. Sometimes this procedure is called
buying down the rate. Discount fees will vary from one lender to another. Thus it is another good area to shop.
Appraisal
The lender wants to be sure the property is worth what the seller is asking and you want that too. That is why an appraisal is usually required as one of those essential closing costs the buyer has to pay.
Credit Report
This is where the lender checks your credit worthiness. The best way to see if you are a good risk is to check your credit history. So the credit report fee is one of the costs the buyer has to pay.
Prepaid Interest
Interest starts at closing, but your payment may not be due for a month. Your lender is not going to let you slip by on this. They want every penny of interest due them. Interest begins to accrue from closing until your first payment is collected. The lender collects that amount of interest at closing. The longer it is before your first payment, the higher that portion will be.
Private Mortgage Insurance Premium
Many lenders want the mortgage insured. If this is a requirement of your lender, then they will collect a premium at closing. Unfortunately, this is a buyers closing costs too.
There will be other buyers closing costs in addition to those listed above:
- Title search (you want to make sure you have a free and clear title to the property you want to buy, otherwise there may be a question of your ownership at some time in the future)
- Title insurance
- Recording fees (this fee is usually required by your local government)
- Property taxes (depending on the date of closing, the seller may have already paid the property taxes, thus you have to pay the portion from the date of closing to when the next tax is due to the seller)
These fees are usually figured by the title company that finalizes your closing. So you can see that the buyers closing costs customarily are fees that the buyer incurs. Some are fees you can shop and others are not. But do not let them stop you from buying your first home. They are just something you have to plan for in addition to the down payment. In no time you will be sitting in your easy chair enjoying the fruits of your labor!
