Many first time homeowners are surprised by the closing costs added on top of the purchase price of the home. Frank Failla, a licensed Long Island realtor explains the various tasks and fees associated with closing costs. Your lending agent or real estate attorney can likely give you a breakdown of approximate costs.
Discount points: varying based on the type of mortgage and loan amount, discount points can be paid by prospective home buyers to reduce their interest rate
Survey: a measurement showing the exact location and dimensions of the property in question
Appraisal: an evaluation of the worth of a home for sale based on knowledge, experience and market data
Credit Report: a detailed report of an individual’s credit, employment and resident history prepared by a credit bureau and used by a prospective lender to gauge the worthiness of a prospective borrower
Prepaid interest: interest paid for the calendar days in the month of closing on a property. The first payment is usually due the beginning of the next month, so prepaid interest is collected and paid in arrears until the first bill is due.
Flood certificate: research completed on a home for sale to determine if it sits in a flood zone
Tax service fee: a fee collected in order to set up a third party to monitor the borrower’s tax payments, ensuring prompt ongoing payment
Title search: the process of researching the history of a property to determine legal ownership
Title insurance endorsements: a fee to cover increased or varied risk on a title insurance policy for a specific home
Recording fees: standard fees charged to file documents related to the sale of a home as public record
Courier fees: fees charged to overnight courier documents to outside parties
Title exam: an examination of records to ensure that the home owner is the legal owner of record and that there are no other liens or claims against the property
Pest inspection: an inspection checking the home for sale for evidence of termites or termite damage, required in order to be eligible for FHA/VA lending
An escrow account may be required to handle future payments of items including homeowner’s insurance and property taxes. Related charges are not fees, but rather provide the funds needed to establish an escrow account to appropriately service a loan. These costs are standard and will be the same regardless of the lender used. The deposit needed for taxes will vary based on location of the home and tax rate.
Do you have more questions about closing costs, or are you ready to take the first step towards buying the Long Island home of your dreams?