Anticipating Settlement Costs

For first-time home buyers, all the fees and extra costs beyond what they are paying for their new house may come as a shock. So it’s best to know about them upfront to avoid being caught off guard. One of the most common questions asked is, “Do I pay the realtor?” And the answer to that one is “No.” The seller pays this cost, and it’s typically a percentage of the selling price. However, the following are the responsibility of the buyer:

• Fees connected to the loan. The lender is going to charge you to process, approve, and make the loan. Some typical ones are an origination fee, the lender’s administrative costs to process the loan. A Loan Discount fee will be required if you want to pay to have the interest rate lowered. You will pay for the appraisal, which is required as well as a credit report fee which the lender paid to get your credit report.
• The Home Inspection fee. This will be paid by you even if the lender ordered it.
• Mortgage insurance application fee. This insurance will cover the mortgage should something happen that you couldn’t pay it. The assumption fee is required if you are taking over the mortgage of the previous owner.
• Fees you will need to pay in advance. Interest–most lenders require payment of the interest from the date of settlement to the first monthly payment. Mortgage insurance premium, which you may need to pay in advance. Also, your lender may require that you pay at least a part of your hazard insurance and flood insurance premiums.
• Escrow Account Deposits. Taxes, insurance, and other possible items that must be paid at settlement may be set up in an escrow account. The lender is constrained as to the amount that can be collected.
• Title Charges. These will vary from lender to lender.
• Government Recording and Transfer Charges. These may be paid by you; sometimes they are paid by the seller. This can be negotiated. You will probably pay the fees for recording the new deed and mortgage. There may be some taxes associated with transfer of title according to where the property is located.
• Additional Settlement Charges. Your lender may require a survey of the property. In that case, you will have to pay for it. This protects you as well as the lender. In some cases, this is paid by the seller.
• Pest and Other Inspections. You don’t want to buy your home and find termites have been eating the foundation. This is sometimes paid by the seller.
• Lead-based Paint Inspections.