Closing Costs & How To Get Them Paid
Real estate transactions have what are known as closing costs usually borne by the purchaser, unless otherwise agreed, contractually. I can only give you an approximate means of estimating closing costs. Among other things ,closing costs may consist of a credit report, appraisal fee, title examination and title insurance, origination fee, notarial fees, and a survey at times. The foregoing list is not necessarily all inclusive. Additionally what are termed prepaids – hazard and flood insurance(if required) prepaid a year in advance prepaid interest, and escrow items required by the lender, including 3 months of insurance premiums, mortgage insurance premiums, taxes, etc. Closing costs are substantial and are normally estimated as a percentage of the loan amount. When you make a loan application, the lender is required to give you what is called a Truth in Lending Statement and this will itemize closely what your actual closing costs will be and this should be more reliable than the percentage of loan amount that an agent or broker may quote you .Suffice it to say that you will need to have a reasonably accurate estimate of the total closing costs including prepaids when entering into a purchase agreement as you will be responsible for payment of same. An estimate in the Greater New Orleans area might be in the range of 4 to 5 % of the loan amount which would include an origination fee and prepaid items. Be certain that when inquiring that you stress total closing costs including prepaids. If you have agreed to pay a discount point (which is usually expressed as a percentage of the loan amount)
your total expenditure may again increase. This article is not intended to cover all conceivable items of closing costs but rather to acquaint you with most of the costs which you may incur. There are many types of financing which will permit the seller to pay either a portion or all of your closing costs. F.H.A., V.A.and Conventional loans normally permit a seller to pay some portion of purchaser’s closing costs. There are, however, restrictions pertaining to the total amount that a seller may contribute to a purchaser’s acquisition of a property. Consult your lender or broker for these restrictions. Please remember that if the seller is to pay some or all of purchaser’s closing costs that it must be included in the purchase agreement in clear, concise terms such that all parties understand precisely their obligations. If you are working with minimal cash in purchasing real estate please remember that most forms of financing will permit a seller to pay all or a portion of the purchaser’s closing costs-and this translates into your ability to get into a property with less money and oftentimes that may be the difference between buying or not buying !
* The preceding article is subjective and represents the professional opinion of the author/ real estate broker, Larry Trunk.
