Most people who are in the market for a new home are aware of the costs associated with purchasing a home and moving, but closing costs can be expenses that may be overlooked, especially for first-time home buyers. The amount of the closing costs will depend on where you live, the type of home you are purchasing, and the type of mortgage you are going to carry, but in most cases they can equal anywhere from two to four percent of the purchase price of your home. So before planning your home purchase budget, here are some hidden expenses that you may want to include.
In general there are two types of closing costs, recurring and non-recurring. Recurring costs include things like fire and flood insurance, property taxes, and mortgage insurance; these are expenses that will have to become part of your monthly budget and in most cases are often anticipated by new home buyers. Non-recurring costs are one-time costs that are associated with closing a home purchase, and in most cases make up the bulk of extra expenses. Non-recurring closing costs usually include:
Title Policies – Most lenders require you to purchase a lender’s title insurance policy, which protects the amount they lend. You may want to buy an owner’s title insurance policy, which can help protect your financial investment in the home. You can usually shop for your title insurance provider separately from your mortgage.
Escrow Wire – Escrow transaction is created and the details such as item, email address for buyer, phone number for the buyer, currency and finer details are added into the transaction. Once everything is set up, the wire transfer is initiated and once received this is held by the escrow service until the goods are received and checked. Once the goods are accepted, the funds are released to the seller and the transaction is complete.
Fees Delivery – A fee charged generally by the title company or attorney for the delivery of documents to your lender.
Attorney Fees –Attorney’s fee is a chiefly United States term for compensation for legal services performed by an attorney (lawyer or law firm) for a client, in or out of court. It may be an hourly, flat-rate or contingent fee.
Endorsements Recording – When you take out a loan to purchase a home, you are required to sign two documents: a promissory note and a mortgage (or deed of trust). Assignments and endorsements are the ways that these documents are transferred between banks.
Transfer Taxes – In a narrow legal sense, a transfer tax is essentially a transaction fee imposed on thetransfer of title to property. This kind of tax is typically imposed where there is a legal requirement for registration of the transfer, such as transfers of real estate, shares, or bond.
Home Protection Plans – A home warranty is not the same thing as homeowners insurance, nor is it a replacement for homeowners insurance. Homeowners insurance covers major perils such as fires, hail, property crimes and certain types of water damage that could affect the entire structure and/or the homeowner’s personal possessions. A home warranty does not cover these perils. Rather, it covers specific components of the home.
A home warranty is a contract between a homeowner and a home warranty company that provides for discounted repair and replacement service on a home’s major components, such as the furnace, air conditioning, plumbing and electrical system. A home warranty may also cover major appliances such as washers and dryers, refrigerators and swimming pools.
Natural Hazard Disclosures – This report provides parcel-specific disclosures of official hazard zones that may affect future use of the property. The report also discloses any statutory natural hazard zones, property taxes and assessments, environmental contamination sites in the vicinity, and insurance claims history.
Home Inspection – A home inspection is a limited, non-invasive examination of the condition of a home, often in connection with the sale of that home. Home inspections are usually conducted by a home inspector who has the training and certifications to perform such inspections.
Lender Fees – Lender fees are fees charged by banks and other financial institutions for processing and funding a loan. They can include application fees, attorney fees, recording fees, underwriting fees and more. Lender fees are items payable in connection with a loan and contribute to the total amount of the borrower’s costs.
Depending on your particular circumstances, the actually closing fees may include just a few of these costs, or even include ones that are not listed here. Purchasing a home is a huge investment and expense, and getting a clear picture of the cost before signing your name on the dotted line is important. So if you are thinking of buying or selling a home get a detailed list of these expenses and the value you deserve by contacting Thompson & Thompson, Your Special Agents with Floyd Realty Advisors.