Closing Costs

Settlement/ Closing Costs

Settlement/Closing Costs are simply those expenses (over and above the price of the property) incurred by buyer and seller in transferring ownership of a property.

At the settlement, you'll finalize the purchase or sale of your home by signing all the papers which make the transfer official. You'll have to pay certain closing costs which are charges for affecting the transaction.

Buyers

Buyers typically can expect to pay closing costs, which are approximately 4% of the sales price. These costs may be offset by the seller (known as Seller Contributions):

Loan origination fees (usually 1 - 2%% of the loan amount) (not charged if you assume an existing loan; however, there will be a loan assumption fee = $150-$500 or higher);
Discount points (depends on your interest rate) (not charged if you assume an existing loan);
Settlement attorney's fees for document preparation, title search, title insurance binder, courier fees to/from lender (approximately $400);
Lender fees for underwriting, tax service fee, document preparation fee (approximately $275 - but higher for ARMs $450);
Title Insurance - the lender requires that you only cover the loan amount; however, for a small one-time fee you should also cover yourself up to the sales price. Although a title search has been conducted to prove the property is free and clean of all encumbrances, sometimes a human error occurs. And it may not be during your title search -- it may have occurred may title searches before that! Typically, in Virginia, title insurance is $2.90 (for lender only) per $1,000 of loan amount up to $100,000 and $2.40 per $1,000 above $100,000 plus $50. For lender and owner policies, it is $3.90 per $1,000 up to $100,000 and $3.40 above $100,000 plus $50. For further discussion, see Title)
Recording Deed: $2.00 per $1,000 of sales price plus $14;
Recording 1st Trust: $2.00 per $1,000 of loan amount plus $13 (for fixed rates) and $15 (for ARMs). Over 4 pages add $1 per additional page;
Recording 2nd Trust: $2.00 per $1,000 of loan amount plus $10;
Survey = $200-$300;
Appraisal = $300 (paid at the time of loan application);
Credit Check = $50-$60 (paid at the time of loan application or before);
Upfront Private Mortgage Insurance or Mortgage Insurance Premiums or VA Funding Fee (see Mortgage Insurance);
Home Inspections -- various fees charged for various inspections -- all payable at the time of the inspection.
Hazard Insurance -- your lender only requires you to provide fire and hazard insurance on your new home; however, you probably want a full homeowners' policy to cover your contents and personal liability. You pay for a full year policy and provide your lender with a paid receipt and the declarations or policy itself. You should purchase this at least two weeks before settlement;
Interest: On most mortgages, interest is paid in arrears while principal is paid upfront. For example: when making the September payment, you are paying the interest for August and the principal for September. Normally a lender allows you to skip the first month's payment after settlement (lenders vary using 45-60 days to first payment). Therefore, if you settled on September 15, your first payment would not be made until November 1 (which would pay the interest for October). What happened to the interest for September 15-30? You have to pay it at the closing table!!
Tax Escrow: Lenders usually escrow at least 3 months of tax payments. This money is yours and is held for you to allow the lender to pay your real property taxes when they come due.
Hazard Insurance Escrow: Lenders usually escrow 2 months of hazard insurance payments. Again, when the policy comes due the next year, the lender will pay for it out of this account.
Mortgage Insurance Escrow: Again, lenders usually escrow 2 months of mortgage insurance premiums so they have the money to renew it the next year. Again, see Mortgage Insurance.

Sellers

Sellers generally are expected to pay the following costs:

Preparation of the Deed
Recording of Releases (to release any liens on the property, such as mortgages)
Termite Inspection
Well/Septic Inspection (if applicable)
Homebuyer Warranty (if applicable)

Settlement/ Closing Costs

Buyers

Buyers typically can expect to pay closing costs, which are approximately 4% of the sales price. These costs may be offset by the seller (known as Seller Contributions):

Loan origination fees (usually 1 - 2%% of the loan amount) (not charged if you assume an existing loan; however, there will be a loan assumption fee = $150-$500 or higher);

Discount points (depends on your interest rate) (not charged if you assume an existing loan);

Settlement attorney's fees for document preparation, title search, title insurance binder, courier fees to/from lender (approximately $400);

Lender fees for underwriting, tax service fee, document preparation fee (approximately $275 - but higher for ARMs $450);

Recording Deed: $2.00 per $1,000 of sales price plus $14;

Recording 1st Trust: $2.00 per $1,000 of loan amount plus $13 (for fixed rates) and $15 (for ARMs). Over 4 pages add $1 per additional page;

Recording 2nd Trust: $2.00 per $1,000 of loan amount plus $10;

Survey = $200-$300;

Appraisal = $300 (paid at the time of loan application);

Credit Check = $50-$60 (paid at the time of loan application or before);

Upfront Private Mortgage Insurance or Mortgage Insurance Premiums or VA Funding Fee (see Mortgage Insurance);

Home Inspections -- various fees charged for various inspections -- all payable at the time of the inspection.

Tax Escrow: Lenders usually escrow at least 3 months of tax payments. This money is yours and is held for you to allow the lender to pay your real property taxes when they come due.

Hazard Insurance Escrow: Lenders usually escrow 2 months of hazard insurance payments. Again, when the policy comes due the next year, the lender will pay for it out of this account.

Mortgage Insurance Escrow: Again, lenders usually escrow 2 months of mortgage insurance premiums so they have the money to renew it the next year. Again, see Mortgage Insurance.

Sellers

Preparation of the Deed

Recording of Releases (to release any liens on the property, such as mortgages)

Termite Inspection

Well/Septic Inspection (if applicable)

Homebuyer Warranty (if applicable)