Buying Your Home - Escrow & Closing Costs
How can I save on closing costs?
Studies show that the closing
costs, which can average 2 to 3 percent of a total home purchase price, are
often more costly than many buyers expect. But there are some ways to save. Your lender may suggest these options:
Negotiate with the seller to pay all or part of the closing costs. The lender
must agree to this as well as the seller.
* Get a no-point loan. The
trade-off is a higher interest rate on the loan and many of these loans have
prepayment penalties. But buyers who are short on cash and can qualify for a
higher interest rate may find a no-point loan will significantly cut their
* Get a no-fee loan. Usually, though, these fees are wrapped
into a higher interest rate though it will save you on the amount of cash you
* Get seller financing. This kind of arrangement usually does
not entail traditional loan fees or charges.
* Shop around for the
best loan deal. Each direct lender and each mortgage brokerage has their own fee
structure. Local lenders are recommended.
What are closing costs?
Closing costs are the fees for services, taxes or special interest charges that surround the purchase of a home. They include upfront loan points, title insurance, escrow or closing day charges, document fees, prepaid interest and property taxes. Unless, these charges are rolled into the loan, they must be paid when the home is closed.
Who pays the closing costs?
Closing costs are
either paid by the home seller or home buyer. It often depends on local custom. Buyer and seller may negotiate these fees. FloridaRealtor/FloridaBar "As Is" Residential Contract for Sale and Purchase states:
Costs to be paid by Seller:
Documentary stamp taxes and surtax on deed, if any
Owner's Policy and Charges (If Seller designates Closing Agent)
Title search charges (If Seller designates Closing Agent)
HOA/Condominium Association estoppel fees
Recording and other fees needed to cure title
Seller's attorneys' fees
Costs to be paid by Buyer:
Taxes and recording fees on notes and mortgages
Recording fees for deed and financing statements
Owner's Policy and Charges (If Buyer designates Closing Agent)
Survey (and elevation certification, if required)
Lender's title policy and endorsements
HOA/Condominium Association application/transfer fees
Buyer's attorneys' fees
All property related insurance
Where do I get more information about closing
For more on closing costs, ask for the "Consumers Guide to
Mortgage Settlement Costs," Federal Reserve Bank of San Francisco, Public
Information Department, P.O. Box 7702, San Francisco, CA 94120 or call (415)
Why do I need a title report?
As much as you as a
buyer may want to believe that the home you have found is perfect, a clear title
report ensures there are no liens placed against the prior owners or any
documents that will restrict your use of the property. A preliminary title
report provides you with an opportunity to review any impediment that would
prevent clear title from passing to you. When reading a preliminary report, it
is important to check the extent of your ownership rights or interest. The most
common form of interest is "fee simple" or "fee," which is the highest type of
interest an owner can have in land. Liens, restrictions and interests of others
excluded from title coverage will be listed numerically as exceptions in the
report. You also may have to consider interests of any third parties, such as
easements granted by prior owners that limit use of the property. Some buyers
attempt to clear these unwanted items prior to purchase. A list of standard
exceptions and exclusions not covered by the title insurance policy may be
attached. This section includes items the buyer may want to investigate further,
such as any laws governing building and