What are Closing Costs?
Closing costs are the combined fees of what it costs to get a mortgage. These are paid at closing, which is how they get the name closing costs.
Closing costs can be applied to both the buyer and the seller during the mortgage process, but today we are specifically talking about buyer fees. Keep in mind that closing costs vary from loan to loan, so make sure you talk to your mortgage broker for a complete list of your closing costs!
1. Title Insurance
Title Insurance guarantees that are no other liens on your property. This is very important because you will want to know that the current property owner can transfer ownership to you with no other debt owed on the property.
Your closing agent will order a title search from a title company and they will get you all the necessary paperwork you need for closing and to obtain title insurance.
2. Appraisal (aka Market Analysis)
Your real estate agent can estimate what your home is worth, but you will need an official appraisal to determine how much the property is actually worth. To determine the value of a home, appraisers look at comparable homes in the market that have recently sold and adjust the value based on the quality and improvements your home may or may not have.
Keep in mind that you cannot get a loan for more than what the home is appraised for and you may be able to use this as a bargaining tool of the seller is asking for more money than what the home appraises for.
3. Credit Report
The all important credit report is something that all lenders require. The fee associated with pulling your credit is another cost that you pay during closing.
Your credit report is important because it contains the status of any loans or credit accounts that you currently have. Some important things lenders look for include any missed payments or judgements and of course what your credit score actually is. For more information on your credit score, check out this post.
4. Transfer Taxes
Transfer taxes are charged when the property ownership changes hands. Both the State of Michigan and the county that you live in charge transfer taxes as a percentage of the sales price of your home. The deed is also recorded during this process and this helps track who legally owns the property.
5. Escrow
Escrow is a way for the lender to have money on hand to pay for property taxes and insurance. Sometimes if you put enough money down (typically 20% or more) the lender will waive escrow and that way you don’t need to have that money upfront and you pay taxes and insurance when they are due.
The nice thing about escrows is you don’t have to worry about budgeting for your taxes and insurance.
How do I find out what exactly my closing costs will be?
Contact us today for a no obligation mortgage consultation. We can help find the best program for you and help you determine how much your closing costs will be! Our office is located in Okemos, right across from the Okemos High School.
Fill out the below contact form or call us at (517) 618-1816 and a representative will be in touch!
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