What
are closing costs?
Closing costs (sometimes
called escrow costs) are costs for all fees and services
associated with completing a real estate transaction in
addition to the down payment. As a buyer the total amount
you will have to pay to complete a real estate purchase
are the down payment plus the closing costs. Some of the
items associated with closing costs are:
Title
Insurance Premium. Fees paid by the
buyer for an owner's policy to insure the title
is marketable and for a lender's policy to insure
their lien position.
Real Estate
Commission. Fee paid to a real estate
broker for services rendered in listing, showing,
selling and consummating the transfer of
property. This fee is usually paid by the seller.
Transfer and
Assumption Charges. Fees charged by a
lender to allow a new purchaser to assume an
existing loan. This is only applicable if you are
assuming an existing loan.
Recording
Fees. Fees assessed by a county
recorder's office for recording the document of a
real estate transaction.
Loan Fees.
Fees charged by a lender in connection with the
processing of a new loan. These may include fees
for loan origination, loan points, document
preparation, property appraisal, administrative
support, and credit report. The loan origination
fee is a mortgage broker charge for securing a
loan. Points are fees the lender charges to
provide you a particular mortgage interest rate
(sometimes called the discount fee). A point is
1% of the loan amount (e.g., the loan fee on a
$200,000 loan at one point is $2,000). When
shopping for a mortgage be sure and ask the
mortgage broker or lending institution for there
par mortgage rate. This is the rate with zero
points and is a good reference to consider when
deciding whether to pay points to secure a lower
rate loan.
Escrow Fees.
Fees charged by a title and/or escrow company for
services rendered in preparing documents
necessary in the consummation of a real estate
transaction. The buyer usually pays this fee in
Sonoma County.
Additional
settlement costs. These costs include,
but are not limited to, taxes and insurance
impounds, interest prorations, termite inspection
fees, other inspection fees, and tax prorations.
These costs are prorated between the buyer and
seller depending on the escrow instructions and
on instructions from the lender.
Title or escrow company
personnel will review and explain your closing statement
when you prepare to close your transaction and take
ownership of your new home.
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How
much are closing costs?
So knowing all that, what
you really want to know is how much are closing costs. In
your planning you need to ensure you have adequate funds
available to pay the down payment and closing costs.
It is important to have a
good realtor to assist you with the escrow process. When
you initially enter into a real estate purchase contract
I will contact the escrow officer and obtain an estimate
of closing costs. You can then prepare for the close of
escrow when the funds will have to be available to
complete the transaction.
However, to assist you at
this time here are a couple of examples of the buyer's
closing costs based on current practices and typical
escrow and title insurance rates in Sonoma County. The
examples assume that these are new loans, not loan
assumptions; therefore, the Transfer and Assumption
Charges do not apply. It is also assumed that the lenders
do not require tax and insurance impounds. These are just
examples and any particular transaction may differ
significantly. Rates and current practices are subject to
change.
This table is organized
similar to a statement you will receive upon the close of
your escrow on your property purchase. It's called a
HUD-1 Settlement Statement/Closing Statement and is
required by the U.S. Department of Housing and Urban
Development.
| Item |
Property
A |
Property
B |
| Purchase Price |
$200,000 |
$400,000 |
| Down Payment -
assume 20% down |
40,000 |
80,000 |
| Loan Amount |
160,000 |
320,000 |
| Items Payable In
Connection With Loan |
| Loan Origination Fee
- 1.25% of loan amount |
2,000 |
4,000 |
| Loan Points - 0% on
a par loan rate of 6 7/8% (6.875%) |
0 |
0 |
| Appraisal Fee |
200.00 |
300.00 |
| Credit Report |
50.00 |
50.00 |
| Tax Service |
77.00 |
77.00 |
| Underwriting/Administrative
Fee |
300.00 |
400.00 |
| Items Required By
Lender To Be Paid In Advance |
| Interest on Loan -
15 days at annual rate of 6.875% |
452.05 |
904.11 |
| Hazard Insurance -
one year policy (cost varies with property
location) |
500.00 |
1,000.00 |
| Document Preparation
Fee |
300.00 |
300.00 |
| Title Charges |
| Escrow Fee |
525.00 |
775.00 |
| Document Preparation
Fee |
50.00 |
50.00 |
| Notary Fee |
20.00 |
20.00 |
| Lender's Title
Insurance |
305.60 |
481.12 |
| Owner's Title
Insurance - based on full base rate (this can be
reduced by up to 20% if title insurance has been
issued on the property within the last 5 years) |
873.00 |
1,422.00 |
| Courier/Overnight
Service |
30.00 |
30.00 |
| Wire Fee |
35.00 |
35.00 |
| Government Recording
and Transfer Charges |
| Recording Fees |
66.00 |
66.00 |
| Additional
Settlement Charges |
| County Taxes - based
on 6 months |
1,250.00 |
2,500.00 |
| Insurance Broker Fee |
100.00 |
100.00 |
| Total
Closing Costs |
$7,133.65 |
$12,510.23 |
| Closing Cost
as a Percent of Purchase Price |
3.6% |
3.1% |
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