Closing Costs
2-5% of purchase price and include some of these numbered 2-9 below. See next section for a detailed breakdown. 2-3% is average.
Appraisal
Couple hundred dollars, is ordered by the mortgage lender and rolls into the closing costs. They want to make sure the home is worth what you are paying & what they are funding. If it isn’t you often can negotiate the price down with the seller.
Inspections
Costs vary from a few hundred to over $1K. As an ex. a 3K sf 5bed/4bath home is $1.2K. The inspections can include roof, sewer, termites, general inspection. Once they are done a RFR (request for repair) can be submitted to the seller. Either they will provide seller credits or repair for you. They can also deny completely.
Downpayment
Typically 3%-20% of the home's purchase price paid to the lender.
Insurance
Typically you need title, condo insurance and additional earthquake insurance. Prices vary based on how much coverage you want. The prepayment of the first year is rolled into the closing costs.
HOA Fees
For condos and townhouses. Paid monthly to HOA. Covers common space maintenance and usually earthquake insurance for the building.
Earnest Money Deposit
Upon offer acceptance, a good faith deposit of 1%-5% of the purchase price is made and held in escrow. This deposit goes toward closing costs, with any excess returned to you. A larger deposit shows the seller you're serious; typically, 1.5%-3% is considered strong.
Property Tax
Paid annually or can be rolled into the monthly mortgage payment. Prepayment of property taxes for the period from the closing date to the end of the tax year is a part of the closing costs.
Realtor Fees
Typically it is 5-6% of the home price split between buyer and seller agent. I will be requesting payment from the seller on each transaction.
Closing Cost Breakdown
Loan Origination Fee
These are charges from the lender for processing the loan application and underwriting the mortgage.
Title Search and Title Insurance
Fees for researching the property's title history and purchasing title insurance to protect against any legal issues with the title.
Recording Fees
Charges for recording the new deed and mortgage with the appropriate government office.
Homeowners Insurance
Prepayment for the first year's insurance premium.
Appraisal
Appraisal Fee: The cost of the property appraisal, which determines its market value.
Attorney Fees
If an attorney is involved in the closing process, their fees may be included in the closing costs.
Escrow Fees
The cost of the escrow agent's services, including holding and disbursing funds during the closing process.
Property Taxes
Prepayment of property taxes for the period from the closing date to the end of the tax year.
Home Inspection Fees
Although not always included in closing costs, if the inspection was conducted before closing, its fees might be rolled into the closing costs.
Miscellaneous Fees
Other smaller fees associated with the closing process, such as courier fees or document preparation fees.
Survey Costs
If a survey of the property is required, its costs may be included in the closing costs.
Points
These are upfront fees paid to the lender to lower the interest rate on the mortgage. Optional.
CONTINGENCES
Contingencies safeguard the buyer's interests. They serve as provisions within the offer, outlining specific conditions that must be met for the agreement to proceed. If you shorten the contingency time or remove a contingency all together it sweetens the offer. There are three main types.
APPRAISAL CONTINGENCY
The inclusion of an appraisal contingency ensures that the property's value aligns with the purchase price specified in the offer. Following acceptance of the offer, the lender arranges for an independent appraisal to assess the property's market value. If the appraised value falls short of the agreed-upon purchase price, the buyer may have the option to renegotiate the terms of the sale, request a price reduction, or terminate the contract while retaining their earnest money deposit. How can you remove this safely? Because you have the loan contingency to fall back on.
HOME INSPECTION CONTINGENCY
This contingency allows the buyer to conduct a thorough inspection of the property by a licensed professional. It ensures that the property is structurally sound and free from significant defects. Should the inspection reveal any issues that are deemed unacceptable to the buyer, they reserve the right to renegotiate the terms of the offer or withdraw from the agreement without financial penalty.
LOAN CONTINGENCY
This contingency provides the buyer with a safeguard in the event that they are unable to secure adequate financing for the purchase. It stipulates that the offer is contingent upon the buyer obtaining approval for a mortgage loan within a specified timeframe. If financing cannot be obtained on the agreed terms, the buyer may withdraw from the contract without forfeiting their earnest money deposit.
EARNEST MONEY DEPOSIT
Put more EMD down. The typical is 1-5% and the more you put down the more serious you seem. Keep in mind you can always get your EMD back and back out of a deal until you release all contingencies on the offer.