In buying a house, you are not only required to pay the purchase price. In fact, there are tons of fees that needs to be paid upfront before you can move in to your new home.
These fees are the considered the cost of closing. They are paid on the settlement day, which is the last and final day in home buying and selling. These fees are quite overwhelming. Any buyer needs to prepare for this ahead of time since the aggregate cost of closing may reach over thousands of dollars.
To help you prepare for the cost of closing, determine what are the different services and fees involved. Below are some of them:
Loan Fees
Loan fees are paid during the closing day to cover for the expenses in obtaining a loan. You probably are wondering where these fees are coming from. They come from services obtained by the lender in granting the loan. Here are some of the fees:
• Fees for incurred for underwriting.
• Fees for processing the loan.
• Fees paid for the application of loan.
• Fees for appraising the house to determine the value of the house.
• Fees for seeking the help of a mortgage broker, who then helps the lender in furnishing the documents for qualification.
• Fees for the delivery of documents to the appropriate party, as in the escrow agent.
• Fees for obtaining credit report for the calculation of credit scrores.
• Fees for ascertaining the over-all condition of the house that will be used to determine what repairs and insurance will be needed for approval of loan.
Title Company Fees
It is just right that you buy a property that is not held as a security from any debts incurred by the seller. That is why in purchasing real estate, the seller is tasked to obtain a document to prove that the property is marketable and the title is clear.
Here are the fees paid to the title company for this purpose:
1. Title search fees- needs to be satisfied according to the law.
2. Fees for notarizing all documents obtained in the purchase.
3. Fees to cover the services rendered by the attorney.
4. Payments involved in obtaining an insurance title to protect the buyer from any problems in the title.
5. Payment for the recording of document in the County Clerk’s office to legalize ownership of the new homeowner.
Fees that needs to be prorated between the buyer and seller
There may be expenses that need to be shared between the buyer and the seller. Pro-ration is done because of the certain expenses incurred by the former owner is not yet due. Thus, these expenses will burden the new owner if not properly settled.
As a rule, pro-rations should be properly discussed and disclose in the contract. Some of the common fees involved are:
1. Payment for property taxes which is usually due at the end of the year.
2. Homeowner’s fee that may be due monthly but the closing day fell in between.
3. Monthly utilities expenses are included such as electricity, phone, gas and more.
The escrow or closing agents are tasked to list all these items in a form called HUD 1 form. In the day of closing, he or she will collect all the payments and distribute it to the right parties.
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