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About Closing Costs & Title Insurance
About Closing Costs & Title Insurance: Closing Fees,
Attorney Fees, Property Taxes, Interest, Loan Application / Origination
Fees, Credit Report, Survey Fee
Congratulations on the purchase of your new home in Central
Indiana! As your VIP
Realty agent prepares you for closing, it is important that you
understand two aspects of the closing process:
- Closing Costs - various fees that must be paid by the buyer
and/or seller at the time of closing, and
- Title Insurance - protection for the lender and buyer
against any future claims on the property
An Explanation of Closing Costs
Closing costs are usually associated and distributed at the time
possession of your home. Upon completion of your mortgage
application, you will receive a "Good Faith" estimate that
itemizes your projected closing costs. This is an estimate of
costs only and does not signify the true amount of your closing
costs, as they may vary by area. These costs can include:
- Attorney fees (yours and your lender's if applicable)
your attorney (or closing agent) will prepare and review the closing
documents. These fees can range from $200-$500.
Some lenders may also charge fees for the lender's attorney services
in connection to your mortgage. This is a fee you can negotiate down
with the lender.
- Property taxes (to cover tax period to date)
- Interest (paid from date of closing to 30 days before first monthly
- Loan application fee -
some lenders may charge an application fee to process and finalize
your mortgage application. This is generally a flat fee ranging from
$75 to $300. Some lenders will refund the fee if you fail to
Tip: Avoid lenders that charge a percentage of
- Loan origination fee - the points that you pay the
lender for extending you a loan. A point is equal to 1% of the
mortgage loan balance; e.g., $100,000 at 2 points equals $2,000.
This can be a significant portion of your
closing costs. You can negotiate with the lender attain the
lowest fee possible.
- Credit Report fee - lenders will pull your credit
report to qualify you for a loan. The fee can range from $45-75,
and is generally passed onto you once your application has been
- Recording fees - pays for the recording of closing
documents into the county records. This fee is about $50.
- Survey fee - pays the surveyor to show the exact
boundary, location, and legal description. The cost can range
from $200-$400 and may be paid by the seller in some areas.
- First premium of mortgage insurance (if applicable) -
there may be two types of mortgage insurance:
- Mortgage Default Insurance, aka Private Mortgage Insurance (PMI)
- protects the lender in the
event you default on your loan. PMI is required for home buyers
whose down payment is less than 20%. Costs may vary.
- Mortgage Life Insurance - names the lender as the beneficiary in the event of
your death. This insurance may or may not be required as part of
your closing and may be negotiable.
- Title Search and Title Insurance
- A title search ensures all parties that the property
purchase is free and clear of all obligations; that no
party has a claim on the house because of unpaid dues, legal suits,
and other factors.
- Title search will be completed by an attorney or title company.
However, some claims on your house can be missed during search. That
is why the lender and you want
- Title Insurance protects your
home from any claims that may occur in the future. Title Insurance
is a one-time fee that you pay at closing.
- Both the Title Search and Title Insurance are combined into
that can range from $400-$700. For more information, read
About Title Insurance, below.
- First payment to escrow account for future real estate taxes and
- Paid receipt for homeowner's insurance policy (and fire and flood
insurance if applicable)
- Any documentation preparation fees, including Notary
Fees - The notary fee guarantees the signatures to the
document. This fee can range about $50 or less.
Some closing costs are negotiable. You are more likely
to negotiate lender closing costs than seller closing costs.
- In some "buyers market" where home sales are not as
strong, you can often negotiate with the seller to pick up a
portion of the closing costs.
- Closing costs can average around 7% of the home purchase
price. These costs can vary widely from 3% to 10% depending
on your location and whether you pay points.
- Closing costs are typically paid at the time of closing
and can be a significant portion of your home savings. So
budget and plan wisely.
About Title Insurance
Title insurance is usually required by the lender to protect them
against loss resulting from claims by others against your new
home. In some states, attorneys offer title insurance as part of their
services in examining title and providing a title opinion. The
attorney's fee may include the title insurance premium. In other
states, a title insurance company or title agent directly provides
the title insurance. The title insurance policy does not protect you. If you want to
protect yourself from claims by others against your new home, you
will need an owner's policy.
- Under the Real Estate Settlement Procedures
Act (RESPA), the seller may not require you, as a condition of the
sale, to purchase title insurance from any particular title company.
Generally, your lender will require title insurance from a company
that is acceptable to it.
- The title insurance company will issue a "Commitment to Insure" or
preliminary report or "binder" containing a summary of any defects
in title which have been identified by the title search, as well as
any exceptions from the title insurance policy’s coverage.
- The "commitment" is usually sent to the lender for use until the title
insurance policy is issued at or after the settlement. You can
arrange to have a copy sent to you (or to your attorney) so that you
can object if there are matters affecting the title which you did
not agree to accept when you signed the agreement of sale.
- If you are buying a newly constructed home, make certain your title
insurance covers claims by contractors. These claims are known as
"mechanics’ liens" in some parts of the country.
- Lenders or title insurance companies often require a site survey to mark
the boundaries of the property. A survey is a drawing of the
property showing the perimeter boundaries and marking the location
of the house and other improvements.
For more information about how VIP Realty can help you buy a home in Central Indiana, call Tammy Bookout at (317) 345 -
8269 or toll-free at 888-VIP-0002 (888-847-0002), or send
Tammy an e-mail, or submit the Request for Information form