Buying Your Home - Escrow & Closing Costs
What Are Closing Costs?
Closing costs are the fees for services, taxes or special interest charges that surround the purchase of a home. They include upfront loan points, title insurance, escrow or closing day charges, document fees, prepaid interest and property taxes. Unless, these charges are rolled into the loan, they must be paid when the home is closed.
Who Pays The Closing Costs?
If a sale is "traditional," the Seller and Buyer will each pay their own closing costs. However, they may be paid by the Seller or Buyer by mutual agreement. This is a negotiable item in the "Purchase Contract."
Is It Possible To Save On Closing Costs?
Studies show that the closing
costs, which can average 2 to 3 percent of a total home purchase price, are
often more costly than many buyers expect. There are some ways to save the cash:
Negotiate with the seller to pay all or part of the closing costs. The lender
must agree to this as well as the seller.
* Obtain a no-point loan. The
trade-off is a higher interest rate. Many of these loans have
prepayment penalties. But buyers who are short on cash and can qualify for a
higher interest rate may find a no-point loan will significantly cut their
* Get a no-fee loan. These fees are wrapped
into a higher interest.
Each direct lender and each mortgage brokerage has their own fee
Why Do I Need A Preliminary Title Report & Title Insurance?
A Preliminary Title Report will provide you with notice of liens, encumbrances and restrictions which exist of record against the property. When reading a preliminary report it
is important to check the extent of your ownership rights or interest. The most
common form of interest is "fee simple" or "fee," which is the highest type of
interest an owner can have in land. Liens, restrictions and interests of others
excluded from title coverage will be listed numerically as exceptions in the
report. You also may have to consider interests of any third parties, such as
easements granted by prior owners that limit use of the property. Some buyers
attempt to clear these unwanted items prior to purchase. A list of standard
exceptions and exclusions not covered by the title insurance policy may be
attached. This section includes items the buyer may want to investigate further,
such as any laws governing building and
(Note:Information on building permits is not included in the Preliminary Title Report)