What kind of fees to expect when purchasing a home.
When purchasing a home, you will inevitably hear about closing costs. These costs are usually lumped into one single amount that you need to bring to closing. It is important to remember that closing costs consist of three distinct types of costs.
- 3 types of closing fees…
- Downpayment - the amount you are paying for a down payment on the home
- Prepaids - pro-rated fees paid in advance. (fees that are pro-rated and returned to you upon selling)
- Fees – just plain expenses, once paid they are spent
The best way to communicate with your lender and broker is to tell them the “total amount for closing” should not exceed $X. Or you can ask, “What is the total amount I must bring to closing?” Either way should be safe!
Be clear on your intent when talking to your realtor. If you say, I want to put down $20,000,to a Realtor that means you want to make a down payment of $20,000. The other closing costs” will be extra. Now that may be what you meant, but if not you may need $25,000 at closing ($20,000 in downpayment and $5,000 in closing costs!). If you don’t have the extra $5000, it could be a very embarrassing moment for all concerned!
Sample Real Estate Closing Fees for Denver
Credit Report - Usually around $60.00 and paid at the time of formal loan application. Non-refundable.
Property Appraisal Fee – Usually around $350 – $400 paid at the time of formal loan application. Non-refundable.
Origination Fee - Customarily 1% of the loan amount, paid by the buyer. The lender’s charge for loan processing and handling.
Discount Points – Vary with mortgage market conditions and may range from 0 – 5 or more. Each point is 1% of the loan amount. Points represent the difference between the loan’s rate of interest and the discount to this interest that the lender will have to offer to sell the loan to a buyer of loans or a loan investor. Points may be paid by the buyer, seller or both.
Mortgagee’s Title Insurance – Usually around $100. The lender (who is the mortgagee) requires the borrower to purchase a title insurance policy to protect the their company against title defects that would affect the loan. (NOTE: The seller purchases a title policy for this protection for the buyers.)
Improvement Location Survey – Usually around $150.00 for completing and handling the paperwork associated with the loan.
Document Preparation – “Doc Prep” Usually around $200 for completing and handling the paperwork associated with the loan by the lender.
Recording Fees – Usually about $35.00 charged by the government for recording the documents associated with the purchase (i.e. warranty and trust deeds) in the county records.
Pre-paid Items – These are advance collections for loan interest, homeowners insurance and property taxes. Daily interest is accrued from the date of closing until the end of the month. One year of homeowner’s insurance premium for the coming year. Two to three months advance payment for the following year homeowner’s insurance premium is placed in the purchaser’s escrow account. Two to four months worth of property taxes are placed in the purchaser’s escrow account over and above the seller’s credit to purchasers.
State Documentary Fees – Tax Stamps one penny per every thousand dollars.
Real Estate Closing Fees – Usually $175.00 (Normally split 50/50 between buyer and seller.)
NOTE: Please don’t assume things are done “just like back home…” Customs differ from area to area. When in doubt, question a fee and who customarily pays it.