Common Closing Costs for Buyers
The lender must disclose a good faith estimate of all settlement costs. A check to cover your closing costs will probably have to be a cashiers check. The title company or other entity conducting the closing will tell you the required amount for:
- Land origination fees
- Points, or loan discount fees, you pay to receive a lower interest rate
- Appraisal fee
- Credit report
- Private mortgage insurance premium
- Insurance escrow for homeowners insurance, if being paid as part of the mortgage and insurance in escrow accounts as they are paid with the mortgage, then pay the insurance or taxes for you
- Deed recording fees
- Title insurance policy premiums
- Inspection fees – building inspections, termites, etc.
- Notary fees
- Prorations for your share of costs, such as utility bills and property taxes.
A Note About Prorations: Because such costs are usually paid on either a monthly or yearly basis, you might have to pay a bill for services used by the sellers before they moved. Proration is a way for the sellers to pay you back or for you to pay them for bills they may have paid in advance. For example, the gas company usually sends a bill each month for the gas used during the previous month. But assume you buy the home on the 6th of the month. You would owe for the first five days. The bill would be prorated for the number of days in the month, and then each person would be responsible for the days of his or her ownership.
Ten Tips for First Time Buyers
1. Be picky, but don’t be unrealistic. There is no perfect home.
2. Do your homework before you start looking. Decide specifically what features you want in a home and which are most important to you.
3. Get your finances in order. Review your credit report and be sure you have enough money to cover your down payment and your closing costs.
4. Don’t wait to get a loan. Talk to a lender and get pre-qualified for a mortgage before you start looking.
5. Don’t ask too many people for opinions. It will drive you crazy. Select one or two people to turn to if you feel you need a second opinion.
6. Decide when you could move. When is your lease up? Are you allowed to sublet? How tight is the rental market in your area?
7. Think long-term. Are you looking for a starter house, with the idea of moving up in a few years or do you hope to stay in home longer? This decision may dictate what type of home you’ll buy as well as the type of mortgage terms that suit you best.
8. Don’t let yourself be “house poor”. If you max yourself out to buy the biggest home you can afford, you’ll have no money left for maintenance or decoration or to save money for other financial goals.
9. Don’t be naive. Insist on a home inspection and, if possible, get a warranty from the seller to cover defects within one year.
10. Get help. Consider hiring a REALTOR® as a buyer’s representative. Unlike a listing agent, whose first duty is to the seller, a buyer’s representative is working only for you. And often, buyer’s reps are paid out of the seller’s commission payment.
Five Common First Time Homebuyer Mistakes
1. They don’t ask enough questions of their lender and miss out on the best deal
2. They don’t act quickly enough to make a decision and someone else buys the house.
3. They don’t find the right real estate professional who is willing to help through the homebuying process.
4. They don’t do enough to make their offer look good to the seller.
5. They don’t think about resale before they buy. The average first-time buyer only stays in a home for four years.
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