Jeff’s Carlsbad Blog for First Time Home Buyers

FAQs – Part 11 (Closing Costs)

Posted in Financial,Taxes by Jeff Dowler on December 2, 2006

moneysign2.gifWhat are Closing Costs?

I don’t meant to sound flippant, but closing costs are the various costs you pay at the time of closing (a.k.a. settlement, close of escrow) in order for the transfer of property to occur. There are a number of things that are included in these costs, and they vary from state to state (check with the mortgage lender handing your deal or with your agent). This is only a partial list but it will give you a good idea of what to expect.

Here, in California, it is common to use an escrow company to handle the transaction, and they will charge a good sized fee for this. You may also need to pay points on your loan.

There will be pro-rated taxes to pay, as well as to reimburse the seller for taxes s/he has already paid, if applicable. The lender will also collect several months of taxes so they can pay the first tax bill, in the event there is not enough collected from you through your monthly payments by that time. You will also need to pay pro-rated interest, generally from the time of closing up until your first mortgage payment, which is usually the first of the second month folowing closing (you close April 14, first payment usually due June 1).

There are transfer fees, recording fees (for the deed and other paperwork as necessary), and overnight delivery fees. You may also pay for the bank appraisal on the home and the loan application fee at this time (sometimes lenders collect these last two fees up front).

The lender will give you a “good faith estimate” in advance of the closing, as required by law. At the closing (if there is one you need to attend) you will receive the HUD-1 Statement which outlines all the costs associated with the transaction for both the buyer and the seller.


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