Closing Costs, Escrow, Taxes, Insurance

Home Closing Costs, hidden costs, escrow, taxes - what does all this mean - find out from the #1 Saint Charles County real estate team Kris Hanson. Yes, it seems like there is a ton of paperwork when buying your new St. Charles home. There are fees you will have to pay to several parties or local government agencies. Below is a list of some of those fees or "settlement costs". Don't worry, as your agent, we will make this clear and simple.

Closing Costs

Closing costs range from several hundred to over a thousand dollars, based on the purchase price of your home. These "settelment fees" cover the cost of handling all the documents needed for the purchase of your home. For more information, visit the Federal Reserve Board's HUD site on settlement cost estimation.


Loan origination fees

Charged by the lender for evaluating, preparing, and submitting a proposed mortgage loan. You may be able to find a St. Charles lender with low origination fees.


Property taxes

These taxes typically cost from several hundred to a couple thousand dollars and are based upon the St. Charles home's purchase price and the date of closing. Keep in mind that at closing, you may have to reimburse the sellers for any property taxes that they paid in advance.


Legal fees

Most of the time, no attorney is used or required. If someone asks you to pay for legal fees, we recommend questioning the need.


Private mortgage insurance (PMI):

This insurance can cost you several hundred dollars. If you put less than 20 percent down on a home, many mortgage lenders require that you take out private mortgage insurance to protect the lender in the event that you default on your loan.


Inspections

St. Charles County inspection fees can run from $200 to $500. You should never, ever consider buying a home without inspecting it.


Escrow Account

Most lenders require you to pay for some items that will be due after closing. These prepaid items usually include insurance premiums (for Homeowners Insurance — also called Hazard, or Fire Insurance), PMI, and Real Estate Taxes.


Survey Fee, Appraisal Fee, Application Fee, Recording Fee

Tired of all the fees yet? These are almost self-explanatory. You may have to pay for a survey of the property, and pay for an home appraisal for an independant value of the home, an application fee to cover the lender's cost to procesd the information, and a recording fee to cover the cost of paperwork about all the fees.


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:
  • Negotiate with the seller to pay all or part of the closing costs. If the seller agrees and is paying part, 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 closing costs.
  • 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 need upfront. * Get seller financing. This kind of arrangement usually does not entail traditional loan fees or charges.
  • Rent the property in which you are interested with an option to buy. That will give you more time to save for the upfront cash needed for the actual purchase.
  • Shop around for the best loan deal. Each direct lender and each mortgage brokerage has their own fee structure. Call around before submitting your final loan application