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Home Buyers and Sellers Frequently Asked Questions - (301) 304-6646

What are the costs when buying a home?

Here is a list of fees you may or may not incur. Some fees might be waived. Some might be covered by the lender or the seller, depending on the state. NB Realtor fees are usually paid by the seller:         
Private Mortgage Insurance, Homeowner’s Insurance, Title Insurance, Appraisal Fees, Escrow Fees, Points or Origination Fees, Credit Report Fees, Document Preparation Fees, Survey Fee, Pest or Mold Inspection, Property Taxes, State Recording Fees.

Private Mortgage Insurance
If you're putting down a deposit of less than 20 percent, private mortgage insurance will often br necessary. It more usually referred to as PMI, and is normally provided by private mortgage insurance companies. The mortgage company (lender) requires this insurance to protect themselves if a borrower defaults on the loan.

There are two options: PMI premium paid upfront or PMI premium paid monthly. To pay the premium up front, it can be paid at closing, or rolled into the loan. Be aware that the size of your mortgage payment and the monthly premiums can be affected by rolling the payment into the loan.

Homeowner’s Insurance
Homeowner's insurance policy incorporated personal liability insurance and hazard insurance to cover both the building and its contents. Insurance is a requirement that can't be avoided when you borrow money to purchase a home. You are required to demonstrate that you have insurance before you close by paying the first year's premium. Following that, you can escrow annual premiums into your mortgage payments.

Title Insurance
To prevent unforeseen land or property disputes that could affect the title to the home, title insurance is usually required. This is often rolled into your closing costs or loan. For yourself, title insurance not mandatory but we've all heard horror stories about such disputes arising that have seriously affected home owners, sometimes with huge financial costs. Therefore, this is something that is probably wise to have, simply for peace of mind.

Appraisal Fees
Lenders will require an appraisal to be carried oout in order to satisfy themselves that the home is worth the amount you wish to borrow. You will need to pay this fee to the lender bfore the appraisal is carried out. An appraisal is also needed to determine the home's current fair market value for tax purposes. The value is justified primaril by comparison with similar homes in the nearby area. 

Escrow Fees
An escrow account is usually set up to hold money during the closiing process and while details of the final agreement between buyer and seller are ironed out. Also, you will likely have a portion of your monthly mortgage go into escrow towards insurance and property taxes. This is simply setting aside money for the month ahead and builds up an amount that will pay for the homeowner's insurance and property taxes when they become due.

Points or Origination Fees
The lender or bank will charge an "origination fee: to cover their services for creating the loan. You may hear the term "points". A point is simpy 1 percent of the loan. It is important to be aware of these additions because your monthly mortgage payment can be increased.

Credit Report Fees
A credit check will be required by the lender in or for a loan to be secured. The fee is usually around $30 or less and the lender may require you to pay it either when the verified credit report is done or add it to your closing costs.

Document Preparation Fees
There will be costs incurred that the broker or closing attorney will charge for the preparation of the documents that are required for the loan and closing. The fees are usually rolled into the closing costs and covered either by the home buyer, the home seller, or both.

Survey Fee
In order to have precise legal details of the property boundaries in the form of a map or drawing, if no there is no existing survey, then a new survey will need to be carried out. This is important for all parties but especially the buyer to protect them from any future legal challenges. This is also another reason to have Title Insurance.

Home Inspection, Pest or Mold Inspection
Brand new homes may not require a pest inspection but this could be a required for older homes, depending on the location and the prevalence of certain pest type. The cost, depending on the type of inspection can be anything up to $500.

Property Taxes
Any property taxes, municipal taxes, or sewer or water fees that the seller has paid in advance would need to be reimbursed by the buyer at closing on a prorated basis.

State Recording Fees
A fee may be required for recording and holding the information regarding the property sale with your county register of deeds. This varies according to the county or state etc. Whether they are payable by the buyer or seller, it is important to understand the fees and by whom they are payable/

An important document to obtain and digest is a preliminary HUD statement. You can request this from your realtor, estate agent ot attorney. By reading this before finalizing your home purchase, you will have a better understanding of the fees you are likely to be responsible for. This form is used across the United States and lists the services and fees the home buyer can expect to be charged by the broker or lender when applying for a loan.

What are the closing costs when selling a home?

The closing costs can vary depending on the specific situation.  The most common are: Mortgage Loan Payoff, Transfer Taxes or Recording Fees, Title Insurance Fees, Attorney Fees, Realtor Fees, Escrow Fees, plus, if due, prorated HOA Fees, unpaid HOA Dues, any Liens or Judgments on the property. In addition to these, there could be costs for necessary repairs identified by the Home Inspection. These can often be negotiable.

Loan Payoff Costs
Home sellers generally want to achieve a sales price for their home that will pay off their mortgage and clear other loans. The mortgage payoff balance will often be somewhat higher than the balance remaining on your mortgage and hopefully the buyer's purchase price. 

If there is a prepayment penalty, your lender will require you to pay that for paying off your mortgage loan before the end of the agreed term. If there are any other additional loans such as a home equity loan or line of credit (HELOC), these will also need to be paid in full at settlement.

Make sure you talk to your lender so that you know what you will require to pay off the mortgage, so that you have an accurate idea of all closing costs.

Transfer Taxes Or  Recording Fees
There are some unavoidable fees that help make up the seller's closing costs, such as: transfer taxes, recording fees, and property taxes. Transfer taxes, for instance are imposed by your state or local government when transferring the property title from the seller to the buyer. 

Along with transfer taxes and transfer feeds, property taxes must also be up to date for sellers before they hand over keys to the buyer.

Realtor Fee
Realtor fees make up a portion of closing costs for sellers at settlement. This is the commission for the real estate agents involved in the real estate transaction. Real estate commissions are negotiable and vary according to the market. They are usually split between the listing agent and the buyer's agent. And in most transactions, it is usually up to the sellers to pay realtor commissions.

Title Insurance Fees
Title insurance fees are important to keep in mind when you sell real estate. Sellers typically pay the buyer's title insurance premium as part of closing costs. Title insurance is vital as it protects buyers and lenders in case there are any future problems with the title in a real estate deal.

Attorney Fees
The seller may have to pay attorney fees as part of closing costs if they have their own attorney to represent them at settlement.

Depending on the state etc., the use of attorneys varies. In some areas both buyer and seller can have attorneys, in othere areas, there can be a single settlement attorney. Who pays the attorney can also vary between seller or buyer.

Additional Closing Costs For Sellers
Additional closing costs for sellers of real estate include judgments and/or liens against the property; property taxes; escrow fees; and any unpaid homeowners association (HOA) dues, as well as HOA dues payable up to the settlement date. These costs for a home sale are separate and in addition to what the buyers pay at closing.

Closing costs may also include termite inspection and remediation, if necessary, depending on the real estate contract; plus home warranty premium for buyers; and repair bills or a credit to buyers in lieu of repairs for items found during a home inspection.

It is important to include any of the closing costs associated with preparing the home for sale, such as any repairs or home improvements that make your home more presentable to buyers. These costs may well reap rewards by attracting a higher sales price, but thery still need to be included in your calculations.

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