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Coping with the pressure on credit cards Chicago Tribune, United States - As a result, credit card companies are reducing card limits, closing inactive accounts and tightening standards for new credit. But you don't have to let ...
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How much will I have to pay?: Unanticipated closing costs
Imagine this: After accepting an offer to sell your home, you review the settlement charges and discover that you're going to net less from the sale than you anticipated because you overlooked the city transfer tax. Or maybe you're a buyer and you've saved enough for 10 percent cash down payment on a $300,000 house. But when you meet with your mortgage broker, you're told that you'll need about $10,000 more in order to buy the home.
Unanticipated closing costs come as a big surprise to many homebuyers and sellers. Closing costs are the fees and expenses that buyers and sellers incur during a real estate sale. Closing costs vary from one area to the next. Who pays which fees-buyer or seller-is usually set by local custom. Sometimes who pays what is negotiated.
As a buyer you might pay such fees as: title insurance; the fees associated with taking out a mortgage; inspection fees; a homeowner's insurance premium; escrow or settlement preparation fees; proration of mortgage interest and property taxes; a tax service fee; flood certification; transfer taxes, if there are any; attorney's fees; a home warranty premium; miscellaneous documentation preparation fees and recording fees, to name a few.
Sellers might expect to pay the real estate brokerage fee; prepayment penalties on existing mortgages; fees associated with paying off existing mortgages and other liens against the property; termite or other repair work agreed to in the purchase contract; a home warranty premium; title insurance; transfer taxes, if there are any; proration of property taxes; attorneys fees; any credits the seller has agreed to give to the buyers at closing; and miscellaneous documentation preparation and recording fees.
FIRST-TIME TIP: Don't wait until your home sale is closing to find out how much your closing costs will run. If you're selling, the agent who prepares a comparative market analysis for you can calculate an estimate of your closing costs. To find out what charges will be levied by your mortgage lender, call the lender directly. Buyers should ask their mortgage broker or real estate agent to give them a list of the approximate closing costs they can expect to pay.
There are several ways buyers can get assistance with their closing costs. One of the biggest costs associated with a home purchase is the mortgage origination fee, called "points". One point is equal to one percent of the mortgage amount. A no-point mortgage will lower your closing costs considerably. Keep in mind that you'll pay a higher interest rate on a no-point mortgage.
There are mortgages available that help buyers finance some or all of their closing costs. Ask your mortgage broker about these loans. Another way to reduce closing costs is to ask the seller for help. Lenders will usually allow sellers to credit some money to buyers at closing to help offset their closing costs. Lenders often limit the amount of such credits to 3 to 6 percent of the purchase price.
Many lenders also limit the amount a seller can credit to the amount of the buyer's nonrecurring closing costs. Nonrecurring costs are the one-time-only charges associated with a home purchase, like mortgage points or a transfer tax. Homeowner's insurance and property tax proration are recurring costs.
In a hot seller's market, your offer may not be competitive if you ask the sellers for a credit for your nonrecurring closing costs. In this case, you may want to increase the offer price to compensate the sellers for the amount of the closing cost credit.
Dian Hymer is author of "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.
