You may hear people talk about, if not warn you about, the closing costs associated with purchasing Clearwater real estate. As you are looking for a home and weighing the listing prices of your favorites, you will want to keep in mind that you will have some other fees (closing fees) to pay in the final transaction.
What You Need To Know About Closing Costs When Buying A Home
Depending on where in the country you live, the actual procedures and costs can vary, but for the most part, they are all fairly predictable. With regards to your area, your Realtor, settlement agent, or lender will be able to advise you most specifically. In the mean time, it might be helpful and interesting to educate yourself on closing fees that you can expect in general.
Let us take a look at some of the closing fees that you can expect. If you hired a Realtor to help you in searching for your home, that Realtor will be paid by one of two ways. First, the seller may pay all of the agents who facilitated the transaction with a percentage of the sales price (that has typically already been determined); if this is the option used, the fee will not be a line item on your HUD-1 Settlement Agreement.
In other situations, you (the buyer) may have already agreed to pay your “exclusive buyer’s agent” through your own negotiations; in such cases, the seller still may pay for a portion on your behalf. Your portion will be a line item expense on your HUD-1.
What Is A Loan Fee? And Why Do I Need To Pay It?
In addition to the Realtor fee, you will probably have a loan fee. That fee includes a fee paid directly to the lender, or any fees paid to a designated payee or third-party loan originator (such as a mortgage broker). If you look carefully over your HUD-1 Settlement Agreement, you will find words like “loan origination fee,” “loan discount,” “credit report fee,” “mortgage insurance application fee,” and so on and so on. It is comforting to know and to learn what they are; it’s always good to know where your money is going exactly, isn’t it?’
What Is A Loan Origination Fee?
So, for example, the “loan origination fee” covers your lender’s costs of financing and administering your loan. It can either be a percent of the loan or a flat amount, depending on how your lender handles things. Hopefully, you are doing business with a lender who has reasonable front-end fees; and keep in mind that it is completely acceptable and savvy of you to shop around for one who does. You will not be able to “jump ship” at the closing appointment, so it is best to choose your lender carefully at the beginning.
The “loan discount” fee is also charged by the lender and is sometimes referred to as “points.” This “loan discount fee” (or these “points”) allows your lender to give you the lowest interest rate possible on your loan. Typically, each “point” is one percent of the mortgage. So, if you pay some “points” upfront, then you can reduce the interest rate that you will pay over the next ten to thirty years. In general, the longer that you expect to stay in a home and pay interest, the better it will be for you to pay those points up front and get a low interest rate. This is just good knowledge to have to help you understand why you are paying “points.”
Again, the list of “fees” goes on and on, but hopefully you have learned even a little more about what is on your HUD-1, line-by-line. When all is said and done and you have finished your closing appointment, you should be able to settle in and make your new house a home.
This guest blog was provided by Robert Lipply who is a Tampa real estate agent. You can visit Robert’s website and search all Tampa MLS Listings for free.
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