The Home Buying Process

Buyer's Fees

Here is a list of fees you should typically expect to pay at closing; there may be more or fewer:

Credit Report

– done by an independent credit association, to establish your credit rating

Appraisal

– done by an independent appraiser, to establish the value of the house

Inspection

– done by an independent home inspector, to provide information about the integrity of the house (typically not required by the lender)

Title

– to disclose whether there are any liens and encumbrances

Recording Fees

– to record the transfer of property with the appropriate government bodies

Courier Fees

– to cover the cost of transporting documents between the escrow service and various other entities

Loan Origination Fee

– this is a fee imposed by a lender to cover certain processing expenses in connection with making a real estate loan

Discount Points

– prepaid finance charges tied to interest rate (the higher the interest rate, the lower the discount points.)

Escrow Services

Seller's Fees

Here is a list of fees the seller should typically expect to pay:

• Escrow services (seller's portion)
• Title Insurance (based on purchase price)
• Excise tax
• Recording fee
• Real estate commissions

As part of your Purchase and Sale Agreement, you can ask the seller to pay your closing costs and prepaid items. Please be aware that lenders may have limitation on the amount of seller contributions – typically 3% to 9%, depending on the loan to value.

Some things that may be required at closing, but not always:

• Water and sewer certification (if your new home is not on municipal and sewer facilities a certification may be ordered through your local health department to save you money)
• Building code compliance letter
• Mortgage insurance
• Survey

Escrow accounts were originally established during the Great Depression of the 1930s, when Americans were unable to pay their property taxes because they were unemployed. It was hard enough, at that time, to come up with the money to pay for food and clothing, let alone a large tax payment.

Lenders and the government worked together to establish a way to keep people in their homes by attaching an extra payment every month to their mortgage payment. Escrow accounts were set up to hold that money in reserve, until it was time to pay taxes. Collections for insurance were also added so that all houses would be covered in the event of fires or other hazards.

That practice continues today, if required by your lender to ensure that:

• Homeowners are protected from the possibility of losing their homes for missing tax payments
• The escrow account will advance the funds to cover any unexpected increase in tax or insurance payments, which may result in higher monthly payments.