How To Understand Buyer'S Expenses

By Dan Handle, 23 Jan 23:06

Explanation of Buyer’s Expenses

Appraisal Fee: Approximately $450-$500 depending on the type of mortgage applied for and the amount. Due at loan application.

Assuming the Existing Mortgage: Buyer pays the interest on the mortgage for the remainder of the month of closing, based upon daily per diem charges due at closing. See also Loan Transfer Fee.

Broker’s Fee: Applicable only during Buyer Broker Agreements between Buyer and Broker involved, unless Seller agrees to pay Buyer’s Broker.

Certificate of Taxes Due: Charged to either Buyer or Seller depending on the type of mortgage. Due at closing.

Closing Fee: Charges from the Title company for closing the loan package for the Lender. Usually charged to the Buyer and due at closing.

Condo Escrow Fee: Typically, two (2) month’s Homeowner’s Association dues for monthly maintenance fee, paid in advance, to keep the reserves at a high balance. The purpose is not to affect the homeowner when an item needs attention or repair. This fee also applies to townhouses, patio homes and some single family homes in subdivisions with special amenities.

Credit Report: Usually $40-$60 per couple. This is a report on the Buyer’s previous ability to pay their installment payments. Due at loan application.

Discount Fees (often called Points): Typically negotiated between Buyer and Seller, pending on the type of mortgage selected by the Buyer.

Conventional Loan – the points are negotiated between the parties.

VA Loan – discount points must be paid by someone other than the Buyer (in this instance, it’s typically the Seller)

FHA Loan – discount points usually paid by the Seller, even though it may be negotiable between the parties.

This fee averages between zero (0) and six (6) points. One (1) point is equal to one per cent (1%) of the loan amount. Due at closing.

Document Preparation Fee: Usually charged on a conventional loan, the amount of this fee depends upon the amount and type of loan. Due at closing.
Down Payment: Depending on the type of mortgage used to finance the home, and on the financial capabilities of the Buyer, varies from zero ($0) money down, upward. Due at closing.

Funding Fees: Normally applicable on VA loans only, equal to one percent (1%) of the loan amount. Due at closing or may be added to the loan amount and financed.

Hazard Insurance: (Same as Homeowner’s Insurance) One year is due in advance and charged at closing. Rates vary depending on the size, construction, location and purchase price of the home. Contact your insurance agent or ask (ENTER YOU NAME HERE) for references. Due at closing.

Hazard Insurance Escrow: Two (2) months is required, in advance, at closing.

Inspection Fee (for Home Inspection Service or Engineer): Approximately $250-$500 depending on the size of the home and the details of the inspection. Due at completion of inspection.

Interest Proration: A daily charge on the interest portion of the monthly mortgage payment multiplied by the number of days of ownership during the month of closing.

Loan Service Fee (often called an Origination Fee): Usually one percent (1%) of the loan amount for making the loan available and for the work involved in processing the loan. Due at closing.

Loan Transfer Fee: Only applicable during an assumption of an existing loan. Due at closing.

Mortgage’s Title Policy: Insures the lender under a Deed of Trust against any loss caused by invalid Title in the Purchaser or loss of priority in recording the mortgage.

For example: First mortgages must be recorded in first position –if not, this insurance protects the Lender.

Due at closing. Additional coverage added to the mortgagee’s policy depends on the type of mortgage purchased and the type of additional coverage.

Mortgage Insurance Escrow: Usually two months of the portion of Buyer’s PMI paid in advance and due at closing.

Recording Fees: Due at closing.

Deed: - used for transferring ownership, usually one (1) page.
Deed of Trust – for fixed rate loans, usually four (4) to seven (7) pages.
Adjustable Loan – for any type, usually six (6) to twenty (20) pages.

Rents: If applicable, based on arrangement between both parties and prorated to date of closing.

Special Taxes: Any special assessment charges while the Seller owned the property. This charge is negotiated between Buyer and Seller. Usually prorated at closing, and due at closing, but can be assumed by the Buyer with arrangements made to pay it over a period of time.

Improvement Location Certificate (or Survey): Fees depend on the type of home and the type of survey requested. The survey is a diagram showing the lot measurements, boundaries, location of the building or home, and easements of the property. Due at closing.

Tax Service Fee: Charged to either party depending on the type of loan obtained by the Buyer (paid by Seller for VA/FHA loans). Verifies, for the Lender’s protection, that the taxes are being paid annually. Due at closing.

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