There is a lot that goes on behind the scenes when purchasing a new home. Closing costs is one of those things.
Closing costs: you may have heard about them on TV. Closing costs are not one set number based on the purchase price; they can include a variety of fees and other charges. Whether this is your first time buying a home, or if you have done this a few times, it is important to have a complete understanding of all the costs associated with purchasing a property.
Here, the True Concept Title team outlines the five most common closing costs. Keep reading to get a better understanding of what you can expect at closing time.
Common Closing Costs When Buying a Home
During the closing process, homebuyers can expect to pay for some (or all) of the following fees:
An Appraisal Fee
An appraisal fee is an amount paid to an appraisal company to determine a home’s fair market value. Lenders require a property appraisal before they approve your loan as they want to ensure that the value of the loan does not exceed the value that you intend to buy.
Your lender will require you to pay a professional property appraiser to make this determination.
Your Credit Report
Your lender will require a credit report to check your credit score and history. This report illustrates to the lender your creditworthiness and your capacity to pay back the loan. Your credit score will also affect the interest rate that you will get for your loan.
The fee that you pay for a credit report will be paid to credit agencies such as Equifax, TransUnion, and Experian. Generally, a credit report costs $15-$30 but some lenders do not require a credit report fee as they obtain their credit reports at a discounted rate.
Closing or Settlement Fee
Closing or settlement fees are paid to the title company that conducts a closing.
- A title company coordinates the closing process with the buyer, seller, agents, lender, and any other parties involved in the sale.
- The fee covers the cost of all the work the title company does to complete the closing including the cost of preparing documents for closing.
Title Search Fee
The fee paid for a title search is paid to the title company to conduct a thorough search of the records of the home that you plan to buy. The title company examines previous deeds, liens, name and property indexes, court records, and a range of other documents.
This is vital to ensure that there are no problems connected to the title of ownership to the property you are purchasing.
Various Forms of Insurance
You may also need to budget for various types of insurance including:
- Private Mortgage Insurance (PMI): Private Mortgage insurance is usually required if you take out a loan that is more than 80% loan-to-value or if the equity is less than 20%. You will also have to pay an upfront mortgage insurance premium if you take out an FHA loan.
- Flood Insurance: If your new home is situated near a flood zone, your lender will require you to purchase flood insurance.
- Homeowners Insurance: Homeowner’s insurance covers any damages that occur to your home and its contents. Your lender will require you to pay the first year’s homeowner’s insurance premium at closing.
- Title Insurance: You must cover the lender’s title insurance costs at closing which protects the lender from any liens that can arise during a house closing. It is also wise to pay for an owner’s title insurance policy to protect your rights as well.
Close with Confidence
You have a choice! Let our closing agents at True Concept Title manage the entire closing process for your new home from start to finish. While you are busy coordinating your move, we will handle the closing process for you.
Are you ready to purchase and close on a new home and need a professional title search or title insurance? Call True Concept Title at (813) 263-7168 for all your title insurance, escrow, and closing needs!