You need not be told that buying a home will be among your life’s biggest investments. Very few things will, after all, surpass the financial investment involved in taking a mortgage and coming up with adequate funds for a down payment. Thankfully, many people have realized this and now save up a substantial amount for their down payment. This way, they boost their odds of getting the best mortgage terms and reduce the financial burden of servicing a mortgage.
They, however, forget a crucial part of the mortgage loan. This is its closing costs, and from Ogden to Hawaii, this is the bible-truth.
Mortgage closing expenses are ideally paid at your loan’s closing. If you, however, do not have enough money to offset these costs, most lenders allow you to roll them over into your loan’s overall repayment. Unfortunately, this option will increase your loan’s monthly repayments. One of the often misunderstood types of mortgage closing costs are the third-party fees. The following are the standard categories of third-party mortgage fees.
Title Insurance Policy
Before investing in a property, real estate lawyers will check the records on the property and ensure that the seller has a right to transfer its ownership. This is also essential when you are refinancing your mortgage. There are two categories of title insurance policies including lender and owner policies. In most states, the property’s seller pays the owner’s insurance while the lender will finance the buyer’s policy. The cost of the title insurance policies depends on the home’s purchase price and the mortgage’s amount.
Escrow Fees
The funds for the purchase of your home will be held by an impartial third party who will distribute the money accordingly throughout your transaction. Escrow fees will cover the costs of paperwork and the handling and exchange of your funds. The fees also include the final recording of your transaction’s documents with the relevant state entities to guarantee its legality.
Appraisal Fees
A property appraisal is essential to ensure the home you are buying is in good condition and if it isn’t, to make you aware of what repairs are needed. There are different types of property appraisal. A limited appraisal only involves a drive-by of your property and taking pictures of its exterior while an automated one is done online. A full appraisal is expensive but will give you a complete picture of your property’s exteriors and interiors.
Homeowners’ Association (HOA) Fees
This is a recent introduction in the real estate spheres. HOA costs are required for a copy of the CC&Rs {covenants, concessions and restrictions} of your new home. The initial fees paid are meant to cover the survey of your home by a mortgage lender and the costs of ownership transfer. Some lenders might pay the initial HOA fees, but this will be your cost after you buy the home.
Most people see no need for the payment of the above third-party costs and assume they are just tricks used by lenders to make mortgages expensive. The above issues, however, need to be independently verified and cannot be handled by your lender. You can hence guarantee that they are all essential costs in your mortgage’s processing.
