Prudential

Estimate of Closing Costs for Buyers

The closing costs are fees associated with buying or selling a home. These are fees normally paid by the buyer and by the seller when closing on a property. Some costs are negotiated.

Buyer closing costs

After you apply for a loan, your lender is required to send you a good-faith estimate of your mortgage rate.  When you have an accepted offer, your escrow company must send you an estimate of your closing costs.  These costs will vary based on the loan and the purchase agreement. Some closing costs are paid in advance. Here are some typical buyer closing costs:

  • The down payment
  • Loan fees (points, application fee, credit report)
  • Prepaid interest
  • Inspection fees
  • Appraisal
  • Mortgage insurance (typically 1 years premium plus an escrow of 2 months)
  • Hazard insurance (typically 1 years premium plus an escrow of 2 months)
  • Title insurance
  • Documentary stamps on the note

Negotiating Closing Costs

Most of the time, not only do buyers and sellers include sales price in negotiations, but closing costs as well. Negotiated expenses can range from high to low cost items. Let’s say the buyer is worried about the heating and cooling, the seller may agree to pay for the house inspection or even for a new heating and cooling system. Most items are negotiable as long as the other party agrees to the written terms in the purchase agreement.  When negotiating closing costs, tax advantages should be a consideration.

Prorated Fees

Some fees are prorated between buyer and seller at closing. Commonly, property taxes are prorated because taxes are paid annually at the end of the year. So if a house sold in June, the property’s taxes are prorated for half the year. Since the sellers have lived in the property from January to June, the sellers credit the buyers with half of the taxes at the closing.

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