Budgeting for Closing Costs

When it comes to buying a home or condo in Jupiter, the thing most people think about is the cost of the home. They want to buy a home that is within their budget, but they also want to get a home they love, in a great location. Sometimes all those things come together, and other times they don't. Sometimes, homebuyers walk away, wait for other options, or decide that they can sacrifice one of the things they like or want in order to get the rest of the things on their list.

No matter where you are in the home buying process, making sure there is a budget for closing costs is important, since that can help avoid any financial surprises right before closing.

What About No Down Payment Loans?

Some loans are advertised as having no down payment. While that is true in some cases, such as USDA, having no down payment usually doesn't mean there isn't any money due at closing. The down payment on a mortgage loan is typically between three and one-half and 20 percent, and is a part of the closing transaction. For a no down payment loan, that part of the money would not be needed, but there are usually other home closing fees and charges.

Taxes and insurance generally have to be paid at closing so they can be placed into as escrow account. There may also be title company fees, and other items that are due when the buyer signs and closes.

How Much Does the Mortgage Company Charge?

For buyers getting a mortgage, the lender may also charge fees. These can be in the form of points, and there are also origination fees for the mortgage itself. Buyers may also find that they are being charged PMI, or Private Mortgage Insurance, if they put less than 20% down on their home.

These fees and costs can add up, often into the thousands of dollars. Buyers who aren't expecting those kinds of fees or in those amounts, can be surprised before closing, when they see their HUD statement and realize how much they will actually need to bring along to the closing table to get their home.

And as a general rule, if you are using a real estate agent, agent commissions are usually paid by the seller of the home and not the buyer. Expenses of the buyers agent, are usually paid by the agent as a cost of doing business.

What Are Typical Closing Costs?

While not all home buying transactions are the same, there are some typical costs that a buyer can expect to pay at the closing table. Most states have similar costs and fees, although some are handled differently. Buyers should ask questions about anything they do not understand, or about any unexpected charges, costs, or fees that appear on their closing statement.

Typical closing costs may include:

• Title insurance - When a Jupiter home is sold, this insurance protects the title that it is free of defects and problems. If a problem is discovered later regarding the title and ownership, title insurance helps to protect the buyer from financial harm.
• Title company or escrow company fees - The title company (or Escrow company in some states) may charge fees for processing the closing, because it takes time and effort to get all the paperwork ready, make sure it is correct, and have both the buyer and the seller sign everything, along with recording the deed and mortgage.
• Title search - A title search is conducted before closing, and looks for problems with the title or ownership. It helps to ensure that the person selling the home has the authority to do so, and that there are no serious defects in the title that would keep it from transferring to another person.
• Credit report - For buyers getting a mortgage, a credit report is necessary. This is cost is generally paid by the buyer at closing, but may be paid ahead of time. If it has already been paid, the buyer may see a credit on the HUD closing statement showing that the money was paid prior to closing
• Appraisal Costs - An appraisal is typically required by the lender if there is going to be a mortgage on the home. The fee for this may be paid ahead of time or at closing. Either way, it will likely appear as a line item on the closing statement, but may be a credit to the buyer if it has been paid at a prior time.
• Home Inspection - The home inspection is generally handled outside of closing but that is not always the case. If the home inspector agreed to be paid at closing, that amount will appear on the closing statement.
• PMI - Private Mortgage Insurance is usually needed when a buyer doesn't put at least 20% down on a mortgage. The PMI for the first year is generally collected at closing, although some mortgage companies collect less at closing or handle this issue differently.
• Escrow - When there is a mortgage, taxes and insurance are typically escrowed to protect the lender's interest in the property. These will be due at closing in most cases, and involve the first year of both. After that, they will be included in the monthly payment.

Not Every State is the Same

Keep in mind that each state is different. Insurance requirements and property tax amounts are going to vary, and the costs that the title company charges may also be different. Asking about the fees early on in the process can help you make sure that the money to close on the house will really be available.

Buyers who are paying cash can avoid paying many of these fees and charges in any state, because they will not have any mortgage company fees, and don't need to set up escrow for taxes and insurance. Their closing costs will be less than a buyer with a mortgage, though generally there will still be fees.

Getting Guidance for Closing Costs and Fees

One of the ways you can feel safer when buying a house is to find out more about the costs associated with it. That way there are fewer surprises. Considering different mortgage lenders may help, since some charge significantly more in origination than others. A real estate agent can often help, though don't neglect also speaking with the title company, several different mortgage lenders, and even an attorney to ensure that the best possible deal is reached.