Posted 6.7.12 @ 7:53
You’ve put down your deposit and you’re ready to close on your real estate… but there are closing costs. Your lender has given you a GFE (good faith estimate) about these, but what do they all mean? Do you have to pay them all or can you avoid some of them? Here we’re going to talk about closing costs and what they mean for buyers. You won’t need to pay your closing costs until the deal has actually closed, but you’re going to want to look over what kind of fees you may incur.
Fees Aren’t Always the Same
The first thing you need to know about closing costs is that depending on the kind of property you’re buying and how you’re buying it (cash, lender financing, owner financing, etc.) your fees may be different. Here we’re going to go over a few of the fees that are the most common, so you’ll know what to expect.
Lawyer’s Fees: Legal fees are part and parcel for virtually all closing costs. You’re paying for the lawyer’s expertise and time.
Appraisal Fees: Your lender will need to appraise the property to ensure that they’re giving you the right amount (and that you can make up the difference) for the property. If the property is worth less than the list price, you may have issues with the lender.
Registration Fees: Registration fees cover everything it takes to get your deed and mortgage registered with the Registry Office.
Title Insurance: Title insurance covers the lender, but it doesn’t cover you. It prevents them from being sued if there is an issue with the title. You can get title insurance of your own; it may cost but it’ll save you in the long run if you run into issues of your own later.
Property Taxes: You’ll have to pay property taxes down for this year and in some circumstances you may have to pay a portion of next year’s taxes as well.
Land Transfer Taxes: LTT is usually 2% or less of your total purchase price for your real estate.
How Much Will You Pay in Closing Costs?
Everyone pays a different amount of closing costs; while the bank will tell you that you’ll need between 1% and 2% of the value of the real estate you intend to purchase, you may need to pay more than this. You’ll want to talk to your mortgage lender about how much you’ll need to pay with your Good Faith Estimate. Most buyers will pay anywhere from $2,500 to $5,000, but this will vary greatly depending on the purchase price of your real estate.
When Are Closing Costs Due?
Closing costs are due at the end, or at closing. You’ll pay these directly to the real estate lawyer that is handling your deal. You’ll want to talk to your mortgage lender the day before you close so you can get a cashier’s check for the amount.