Closing costs explained
Closing costs are usually lumped into one single amount for you to bring to closing. It is important to remember that closing costs consist of three distinct types of costs. Be clear on your intent, because if you say, “I want to put down $20,000.” Well to a Realtor that means you want to make a down payment of $20,000, the “closing costs” will be extra. Now that may be what you mean, but if not it could mean you are coming to closing with $25,000 ($20,000 in down-payment and $5,000 in closing costs!) If you don’t have the extra $5000, it could be a very embarrassing moment for all concerned!
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!
Sample Closing Fees for Denver
Credit Report - Usually around $60.00. Paid at the time of formal loan application. Non-refundable.
Property Appraisal Fee - Usually aroun $350 – $400. paid at the time of formal loan application. Non-refundable.
Origination Fee – The lender’s charge for loan processing and handling. Customarily 1% of the loan amount, paid by the buyer.
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.
Mortgagees Title Insurance – Usually around $100. The lender (who is the mortgagee) requires the borrower to purchase a title insurance policy to protect the mortgagee 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 This is a charge for completing and handling the paperwork associated with the loan.
Document Preparation – “Doc Prep” Usually around $100. This is a charge for completing and handling the paperwork associated with the loan. Usually around $200. A lender’s fee.
Recording Fees – Usually about $35.00 Fees charged by the government for recording in the county records. The documents associated with the purchase (i.e. the warranty and trust deeds).
Pre-paid Items – These are collections in advance for loan interest, homeowners insurance and property taxes. Daily interest from the date of closing until the end of the month. One year’s homeowner’s insurance premium for the coming year. 2 to 3 month’s in advance payment for the following year homeowner’s insurance premium which is placed in the purchaser’s escrow account. 2 to 4 month’s 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 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.
© Copyright 1998 – 2009 Kristal Kraft
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