Buyer Closing Costs:

A Sizeable "Bundle" Of Cash Due At Closing

 

What are they? How much are they? And to whom are they paid?                                

 

Mortgage Costs:

 

Mortgage Tax: This New York State tax amounts to 3/4 of one percent of the total mortgage minus the $25 exemption allowed for residential properties. (.0075 x Amount of Mortgage)

 

Appraisal Fee: Paid to the bank for appraising the property. Approx. $350

 

Credit Report: Paid to bank for researching the borrower's credit. Approx $50

 

 

Bank's Attorney Fee: If there is a mortgage, the lending institution's attorney is responsible for reviewing the title to the property, working out any title problems, coordinating the closing, typing up the bank papers attending the closing, dispersing the funds at closing, making certain that all documents are recorded properly and accepting responsibility for the accuracy of all documents.

 

Mortgage Title Insurance: Title insurance guarantees that if  the title should have a defect, the policy holder will receive just compensation. Title insurance is a one time charge.

 

Origination Fee (Points): One point is equal to 1% of the total mortgage. The points charged vary from one bank to another. Points are one of the largest costs a home buyer is likely to face at closing. Points are tax deductible as long as they are paid as an origination fee and not as a discount on the mortgage.

 

Mortgage Recording Fee: Paid to the County Clerk's office is about $10 plus $3 per page. An average document is $50 - $75.

 

Private Mortgage Insurance (PMI): By law a bank cannot lend more than 80% of the appraised value of the property. In order to make a loan above 80% of the purchase price, banks require private mortgage insurance. The annual premium, which is included in the monthly mortgage payment, will initially cost .0067 of the total loan. PMI premiums are paid for as long as the balance remains above 80% of the value of the property.

 

Interest-Only Payment: The new homeowner's first mortgage payment will not begin until the end of the first full month after the closing. Because of the time gap between when the first payment is due and the date of the acquisition of title to the property, banks require a payment of interest for those days remaining in the month that the closing takes place. You can determine this amount by multiplying the total mortgage amount by the interest rate and dividing the total by 365. This is the interest charge per day. Multiply this amount by the number of days remaining in the month of the closing.

 

Municipal Searches:   The title company will usually charge an additional amount to verify such items as certificates of occupancy, board of health issues (for wells or septic systems), etc.

 

Other Costs:

 

Attorney's Fee: This will vary depending upon the attorney. Some bill on an hourly basis and some charge a flat fee to handle the entire transaction.

 

Recording of Deed: This fee is paid to the county and is usually $11.00 plus $3.00 per page.

 

Homeowner's Insurance Policy: This amount varies according to the house, the type of coverage and the

insurance company. The buyer is required to bring a paid receipt for an insurance policy listing the lending institution as the loss payee, to the closing.

 

Oil in Fuel Tank: If the home being purchased is heated by fuel oil, the buyer will be expected to reimburse the seller for the fuel remaining in the tank at the time of closing. The home seller will provide documentation of the amount of oil in the tank.

 

Closer's Fee: This is a gratuity paid to the person representing the title company at the closing. Your attorney will give some indication of what is customary but it is usually less than $100.

 

Survey (if required): Lending institutions require surveys. If the home seller's survey is old or modifications have been made to the property since the last survey, an updated certified survey may be required. A new survey can cost $1000 or more.

 

Inspections:

 

Termite: Usually required by the lending institution. This is either done before signing a contract or included as a contingency in the contract

 

Radon: Many buyers are now testing for the levels of radon present in the home. A radon test usually runs about $75.00

 

Lead: The federal government requires that buyers and sellers be informed about the long term hazards of exposure to lead. Buyers and sellers are given an EPA booklet explaining the sources and hazards of lead in a home. Buyers have the right to conduct an inspection to determine "a risk assessment." The presence of lead does not necessarily mean a hazard exists. These tests are expensive and depending upon the amount of testing to be done, lead tests can cost in excess of $750.

 

Structural: This is to determine the general integrity of the structure and its mechanical systems. It is either done before signing a contract or included as a contingency in the contract.

 

Water Analysis & Septic: The lending institution will require these tests to determine if the water supply is potable and if the sewage disposal (septic system) is adequate and functioning.

 

Taxes Paid At Closing:

 

Tax Escrow: The bank will most likely require the home buyer to deposit funds into an escrow account in advance to be used by the bank to pay the next property tax payment when it is due.

 

Reimbursement To Seller For Prepaid Taxes: Since property taxes are pre-billed either annually or semi-annually, the seller will, most likely, have paid property taxes for a period in which the buyer will be the owner of the property. The annual taxes will be prorated and the buyer will reimburse the seller for any taxes that cover a period after the title has passed.

 

Mansion Tax: In New York State, all properties that sell in excess of $1,000,000 are subject to an additional tax of 1% of the sale price.

 

Final Note:

 

Closing costs represent

a sizeable chunk of cash that should be

factored into your budget right from the start.