Closing
The final, exciting step to becoming the new home owner! The date of the closing is typically when the seller is paid in full, the title is transferred to the buyer and the deed is recorded with the city Registry of Deeds. There are several costs associated with closing which are listed on the HUD-1 (U.S. Department of Housing and Urban Development) Settle Statement. It is not uncommon for buyers and sellers to negotiate on which items of the closing costs are to be paid by the other party.
Always do a final walkthrough of the property before closing to make sure there are no problems such as agreed upon repairs which are still incomplete or the home is still occupied (unless agreed upon by both buyer and seller, the home should be vacant or it may be troublesome to force the seller or tenants out of the home once the seller has already received his or her payment in full). In some states, a tenant's rental contract must stay in place regardless of transfer of ownership. Ask your realtor or attorney what your state laws are regarding tenant-landlord contracts before planning your move if the home is currently rented out.
In general, expect to pay between 1-2% of the loan in closing costs assuming 0 points are being paid (i.e. $300,000 mortgage = $3,000 - $6,000). Below are the most common fees a buyer is responsible for and listed on the HUD-1 Settlement Statement.
Loan Charges- Loan Origination Fee - Fee for processing the loan (can sometimes be waived)
- Application Fee - Often due when you first apply for a loan (can often be waived)
- Processing Fees - Fee for Processing the loan application (can sometimes be waived)
- Appraisal Fee - Fee for appraising home to ensure property is not overpriced
- Points / Loan Discount - Prepaid interest; 1 point = 1% of loan (tax deductible)
- Prepaid Interest - Interest paid for remaining days in the month after closing
- Prepaid Property Tax - Usually a percentage of the loan or next scheduled payment is paid in advance
- Prepaid Home Insurance - A certain percentage or a few months worth of home insurance payment due in advance (applies if buyer chooses lender to collect insurance premium instead of buyer making payments directly to home insurance company)
- Prepaid Mortgage Insurance - If mortgage is greater than 80%, a certain percentage or a few months worth of mortgage insurance payment is due in advance
- Settlement / Closing Fee - Fee for closing agent (ask your lender to select your attorney)
- Title Search / Examination - Fee for investigating any issues with title to property
- Lender's Title Insurance - Protects lender from any claims against the property that were not discovered during the title search
- Owner's Title Insurance - (not always required, but always recommended) - Protects new owner from any claims against the property that were not discovered during the title search
- Recording Fees - Fee for recording the deed in the city's registry of deeds
- Transfer Fees - Fee charged by city, county or state for transferring title
- Condo / Co-op Fees - Condos and Co-ops fees paid for the month by the seller are usually prorated
- Property Tax - Property tax is prorated (i.e. last month seller paid for 3 months of tax, so buyer prorates 2 months back to seller)
- Attorney Fees - Buyer's attorney fee is usually added to closing costs
