One of the more overlooked aspects of budgeting for a new home mortgage are closing costs. Mortgage closing costs are fees and expenses that you will need to pay to secure a loan for your home that go beyond just the down payment. First-time home buyers often don’t consider that these costs can mount, and to put yourself in the best financial position possible, you’ll want to be prepared, mentally and financially, to understand these additional costs of a home mortgage.
Today on the blog, we’ll talk about mortgage closing costs and some of what you’ll need to plan on having to pay to seal the deal on that new dream home! Be advised, you’ll want to speak with a professional here at our branch to get a full assessment, this blog is just a tool to help you better understand what to expect.
So, what will you need to pay at closing? Well, here are a few examples of closing costs, what they are, and who the buyer pays them to:
- Loan Origination Fees
- Appraisal and Survey Fees
- Attorney Fee
- Homeowners insurance
- Property Tax
- Title Insurance
- Private Mortgage Insurance
Loan Origination Fees
These fees are simply for the lender to process and underwrite the loan. Underwriting is a part of the loan approval process, when the lender needs to make sure that you can pay your mortgage loan based on your financial background.
Appraisal & Survey Fees
You may typically pay this cost prior to the final closing table, but an appraisal fee is paid to a licensed appraiser to determine what the home is worth. It helps to determine fair market value.
Attorney Fee
In New York, attorneys are used to provide legal counsel throughout the process. They help with any legal advice and guidance, and review the closing documents. They also help deal with any issues or disputes regarding the title and will ensure the transaction is completed legally.
Homeowners Insurance
Homeowners’ insurance helps cover compensation in the event your home is damaged. Most mortgage lenders will require you to have homeowners’ insurance to get a mortgage loan. Depending on your lender, you may for example, be required to pay a year’s worth of homeowners’ insurance at closing.
Property Tax
Taxes will vary by location, but you may be required to pay six or more months of advance tax at closing. Once the loan closes, the property could be reassessed, so the value could increase, along with the property tax. This may require escrow accounts to be adjusted to have enough to pay for the taxes. You can estimate these costs using public records and appraisal value.
Title Insurance
Based on the purchase price, these are just policies to ensure that the property can and will be transferred legally. This protection covers both the buyer and the lender in the event of problems with the property’s title, such as unpaid liens, fraud, or disputes over ownership.
Private Mortgage Insurance (PMI)
If you plan to put down less than 20% for their down payment, you may need to pay private mortgage insurance. This protects the lender in the event that you cannot repay your loan. It’s important to note that it does not protect the borrower. This is usually paid as a monthly payment, until the borrower reaches 20% of the home’s current market value.
These are just some of the main fees a homebuyer typically will see when closing on a mortgage. There may be other fees associated with buying a home, but the more prepared you can be for the final closing cost, the better. It’s important to know that not all mortgage loans or lenders are the same, and you should certainly make an appointment to meet with a mortgage specialist here at TVFCU if you have any questions regarding closing costs or buying a home. Closing costs fees will always depend on the amount that you’re borrowing, but each lender will do things a little differently. We hope you learned something today, and be sure to let us know if there’s anything we can do to help if you or someone you know is taking the first steps on their homebuying journey!
Give us a call at (585) 343-5627 to speak with someone, or stop by our branch at 10 Jefferson Square, right here in Batavia, to talk about your next home!
