BUYER'S CLOSING COSTS
– Mortgage Costs –
Speak to your attorney about which fees will apply in
your situation.
Mortgage Tax
This state tax amounts to 3/4% of 1% of the total
mortgage minus the $25 exemption allowed for residential
properties.
Appraisal Fee
This fee is for appraising the property. For an average
one-family house it is approximately $275 - $350.
Credit Report
The fee ranges from $15.00-$54.00 to investigate the
borrower’s credit rating.
Bank’s Attorney’s Fee
This fee can vary. An average fee is $450 - $550. For
this fee the bank’s attorney is responsible for
reviewing the title to the property, working out any
title problems, coordinating the closing, typing up the
bank papers, attending the closing, dispersing the money
at the closing, making sure all documents are recorded
properly and accepting responsibility for accuracy of
all documents.
Mortgage Title Insurance Policy
Title insurance guarantees that, if for any reason the
title should have a defect or prove to be defective, the
holder will receive just compensation. For example,
several years after you’ve purchased your home it’s
revealed that the previous owner had a tax lien on the
property, or that a portion of the property was
incorrectly surveyed and belongs to someone else. The
title insurance company would pay the homeowner’s legal
costs and would settle the case by paying off the
rightful owners. Before a title insurance policy is
issued, a title search is conducted to prevent such
occurrences from happening. Title insurance is a
one-time charge. These are recommended guidelines
suggested by the State that govern premiums for title
insurance. They are divided into two payments - one that
covers the banks and is required, the other covers the
homeowner and is highly recommended. A general rule of
thumb is that it will cost abut $1,100 for the first
$150,000 and $4 per $1,000 above that. In addition to
the fee title insurance policy, the homebuyer may be
required to pay for a Market Value Endorsement. This
additional charge on a title insurance policy will raise
the value of coverage to keep pace with the rising
values of real estate.
Points
Each point is 1% of the principal amount of the loan.
Points on a purchase are a buydown and are considered a
form of pre-paid mortgage interest, you should consult
with your accountant about tax deductibility.
Fee
for Recording Mortgage
This fee, which is paid to the County Clerk’s office,
will run $10 plus $3 per page. For an average document
this totals $60 - $70.
Private Mortgage Insurance (PMI)
A premium that the buyer pays for the lender to be
insured, if the buyer is borrowing more than 80% of the
appraised value of the home. Speak with your mortgage
consultant about ways of avoiding this insurance.
– Other Costs –
Attorney’s Fee
Your attorney’s fee will vary depending on the attorney.
Attorneys may bill on an hourly basis, or a pre-set
amount.
Recording of Deed
This fee is paid to the county and runs $11 plus $3 per
page for a
total of $20.
Homeowner’s Insurance Policy
The home buyer is required to bring to the closing a
paid receipt for an insurance policy listing the bank as
the loss payee. The cost varies depending on the type of
coverage and the insurance firm. We recommend you
discuss this with your attorney.
Adjustments
Also called “apportionments”, these are fees that are
pro-rated to determine the buyer’s costs. They can
include adjustments on taxes and fuel left in the tank.
Survey
(if required)
Banks do require surveys so that they can sell the
mortgage on a secondary market. If the existing survey
is more than 10 years old, there are structural changes
or a new driveway or fence has been added close to the
property line, an updated and certified survey may be
required. A complete new survey will cost $1,000 and up
depending on property size. A homeowner would want to
discuss the accuracy of any old surveys with their
attorneys.
– Inspection Costs –
Termite
Some banks may require this inspection. This precaution
is especially important for older homes. Signs of
termites include apparent rot around windows or walls.
This inspection should be done before you sign a
contract for a home. Figure on $65 to $100 for a termite
inspection.
Radon
Many buyers are now having their prospective homes
tested for radon. This could cost between $100 and $150.
Engineers
A typical inspection report will list the condition of
the major components of the house - plumbing, structure,
foundation, electrical, etc. This inspection should be
made before signing a contract for a house. An engineers
inspection may cost $275 to as much as 1% of purchase
price.
Water Analysis and Septic Test
The bank will require these tests to determine if the
home’s water is drinkable and if the septic system is
adequate. These tests will cost between $150 and $250.
– Condominium Charges –
Common Charges & Maintenance Fees
These charges are paid to the board of managers who runs
the condo. Condo boards will usually require charges for
one month in advance.
Contribution to Capital
This is a fee usually associated only with new
construction. This fee (generally equal to two months of
common charges) is put towards the condo’s board general
budget for operating a condo complex that is still under
construction.
Recording of Power of Attorney
Condominium boards may require all condo buyers to give
the condo board the power of attorney to make decisions
on behalf of the entire condominium complex. This fee is
$25.
– Taxes Paid at Closing –
Tax Escrow
The bank may require that the home buyer deposit funds
into an escrow account to be used by the bank to pay
next year’s property taxes.
Reimbursement to Seller
for Prepaid Apportionments
Since the seller has paid taxes on the property, the
buyer will owe the seller a portion of these prepaid
taxes.
Mansion Tax
All properties that sell in excess of $1,000,000 are
subject to this tax of 1% of the sale price. Subject to
tax law changes.
The Tax Escrow and the Tax Reimbursement to seller are
major expenses and are frequently overlooked when
estimating total closing costs. Of all the expenses
involved in a closing, there are only three variables —
the bank’s points of origination charge, the bank’s
legal fees, and the homebuyer’s legal fees. The rest of
the closing costs have remained fairly steady over the
past few years.
This information has been compiled from a variety of
sources and is meant to be used as a guide only.
Your real estate attorney is still your best source for
exact closing costs.
