Foreclosure in Sacramento>Question Details

Lucky, Home Buyer in Las Vegas, NV

First time home owner, someone please explain me What is Closing Cost, How much is, And Who pays for it

Asked by Lucky, Las Vegas, NV Fri Jan 8, 2010

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Closing cost are fees to close -which usualy consist of loan fees/title and escrow fees- escrow and title fees , and home owners insurance,differ in different parts of the country- these fees also need to be a factor on the cash you are reserving to buye a house- I at one time worked in title and escrow and alot of 1st time buyers had socked away their little nest egg on the down payment, and when it came time to sign papers and bring in the cash to close they were not prepared for this additional cost and some cases could be several thousand of dollars.

The lender will have there fees wich will vary
Title and Escrow are based onn the purchsae price- and no lender will close without title insurance and on a purchase there are 2 policies (1 for the lender and 1 for the home owner- this clears title)
Then the title company has miscellaneous fees- recording fees, doc prep, notary, and some other fees are capped and changed this is the bulk-
You will also need to pay a years premium upfront for Homeowners Insurance-

This is the bulk in a nutshell- always ask your agent for a estimate- it is never going the bottom line until you are getting ready to close and everyone has hard numbers in-

So Good Luck I hope this helped
1 vote Thank Flag Link Fri Jan 8, 2010
Hi Lucky,

Closing costs are the fees associated with closing the transaction. The true cost of buying a home would be the agreed purchase price of the home PLUS all of the closing costs connected with the transaction. A rough estimate of closing costs would be from 2% to 4% of the purchase price.

As a buyer you would prefer the seller to pay as much of the closing costs as possible. But when you write an offer you need to specify who pays each cost transaction fee. Fees related to your loan are not even part of the ordinary purchase agreement and would need to be incorproated as a seller credit.

Depending on market conditions this can be more or less likely. Under the current market conditions, because home inventories are low, sellers are pushing more costs to the buyer.

Hope this helps.
1 vote Thank Flag Link Fri Jan 8, 2010
Joanna, I definitely agree with you that there are a lot of times out there where people get charged fees from each end, and get talked into it. I find some of the worst offenders are people who are non-English speaking, who are lulled into a false sense of getting taken care of by someone who speaks their language. I know that the new GFE is supposed to help, as is the fact that there are stricter licensing and testing requirements for loan officers. What I think might happen though is that the same kind of disreputable people will be out there, working for small mom and pop shops, where they will do whatever they can to get around the rules, will not disclose properly, but they are not big enough for the bank departments to want to bother with them.
0 votes Thank Flag Link Fri Jan 8, 2010
Direct Link may assist you therefore you can read details yourself
http://www.homeclosing101.org/costs.cfm
0 votes Thank Flag Link Fri Jan 8, 2010
Hi Lucky,

I did want to mention that even during Short Sales lenders have been known to pay some non recurring closing costs. May not always happen but it never hurts to ask..
0 votes Thank Flag Link Fri Jan 8, 2010
Hi Robin,

It will not matter to the client if the Lo is getting paid a higher spit/ rebate as long as they are not charging the client a higher fee on the back end to get it.

Very few home buyers or Realtors know anything about YSP, nor do they know is doesnt get disclosed if you work for a bank or direct lender although I believe it is called a different fee.

If the broker gets paid better because they perform better or have a better "Pull Through Rate " with the lender they have earned that. But dont charge the cient on the back end and extra point - 3 points when they arnt aware of it like so often happens.

Honestly, the GFE can say what ever it wants. but we all know too well smooth talking sales people will say it something that its not and the poor person who doesnt understand is left in the cold.
The only way extra disclosures are going to matter is if the sales people are honest about what they are disclosing and not try to cover things up.

My husband has been in this industry for over 20 years and its shocking what Ive learned. His fees are extremely competative compared to what Ive witnessed when I audit my clients loans because they dont know the questions to ask or weather the fee is required or negotiable...

Im all for people earning a living and getting paid for hard work, but when it comes to over charging and not being honest putting your commission before the client I have a very hard time with that..

Sincerely,

JoAnna Jensen
Realtor - Legal Assistant
0 votes Thank Flag Link Fri Jan 8, 2010
Buenos Suerte, Senor Suerte.

An English-Spanish translating dictionary por Costos de cierre is available here:

http://www.hud.gov/buying/terms_eng-sp.cfm
0 votes Thank Flag Link Fri Jan 8, 2010
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
Contact
The best way to answer your question is to tell you to speak with your lender and with your Realtor. While Trulia is a great resource for general information, it is best to speak with your representatives about your specific situation.

I find that many people ask questions here instead of speaking with their Realtor/Lender.

Good Luck,

Ray
0 votes Thank Flag Link Fri Jan 8, 2010
Joanna, one of the advantages of the new 2010 GFE is that the kind of thing you are mentioning is going to become less common. The buyer or borrower, in the case of a refi, will have the opportunity to compare these costs. The one issue about yield spread premium is that if someone is a lender, as apposed to a broker, there really is a yield spread premium, although it is not called that, and, more importantly it doesn't have to be disclosed at all, even with the new GFE. What people have to compare is what their rate is, and what closing costs the you will pay to get that rate. If a person were to get quoted and locked in at the same rate by 2 different loan officers, and let's for argument sake say that they even both work for brokers, but because one works for a larger company that gets a bonus from the lender as a preferred customer, or brokers to a different bank that pays a higher YSP, and one loan officer makes more than another when selling the same rate, does that really matter to the customer?
0 votes Thank Flag Link Fri Jan 8, 2010
Hi Lucky,
You have good answers on closing costs. They can be negotiated for the most part.

The big question to ask about fees are what you broker/ loan officer charges. You want to be very direct with them. Some people are so concerned with "no points no fees" that they dont look at what is being charged on the "back end". That is referred to as a Yield Spread Premium. For example, lets say you have a decent credit score, your loan officer tells you you dont qualify for premium rates you have 7.95. They could very well be getting paid a hugh rebate from the lender!!!

I do loan mods and audit/review my clients HUD1. I am amazed to see that some clients have paid up to $16k in closing costs. You need to not be afraid to ask questions. Some people, hopefully most are trying to build a lifetime referral busiess. However others will charge as much as they can on each transaction.

Also some other fees may be negotiable. Such as junk fees, if they are already chargind a desk fee, then a processing fee, then a lenders fee. etc. See what Im getting at. the can end up charging a lot of unnecesary closing costs. So know what goes where and what can be reduced!!!

Best of Luck

JoAnna Jensen
Realtor - Legal Assistant
Legal Realty
Calif
0 votes Thank Flag Link Fri Jan 8, 2010
Closing costs can include title and escrow fees, inspection fees, loan fees, transfer taxes, HOA fees in other words all fees associated with the purchase or sale of the property. Who pays it and the amount varies according to the contract terms, the type of loan the buyers is obtaining (for example a VA loan limits the type and amount of closing costs a buyer pays). It is also depends on the area in which you are purchasing. Some of the closing costs are fixed amounts and some are based on a % of the purchase price.

Your lender or Realtor can help you figure out an estimate for your area. Check also http://www.hud.gov for homebuyer guides.

Teri Andrews-Murch, Realtor®, SRES®
DRE CA Lic # 01734030
Lyon Real Estate
1900 Grass Valley Highway, Suite 100
Auburn, Ca, 95603
Direct Ph: 530-798-0215
0 votes Thank Flag Link Fri Jan 8, 2010
Lucky -

First and foremost - some closing costs can be negotiated and paid for by the seller.

There are closing costs related to your loan. There are also closing cost related to escrow, which include title insurance and simple fees (notary - etc).

Great links that explain closing fees.
http://www.homeclosing101.org/costs.cfm
http://www.youtube.com/watch?v=fifp2mLGoWc

Recognize that each county will have different "customary" standards on whether or buyer or seller pays for specific closing costs. Touch base with a local real estate professional for specific standards for the county.

CJ
Web Reference: http://www.TalkToCJ.com
0 votes Thank Flag Link Fri Jan 8, 2010
Hi Lucky: Closing costs are

What a lender charges for lending their money up front.
escrow fees
title fees
recording fees
notary fees
pro-rated real estate taxes
pro-rates hoa dues

Any other fees that are mentioned in the offer documents or by the lender. Figure about 3% of the purchase price for a total of these fees.

As to who pays for them, it's completely negotiable. It's not uncommon in the Sacramento market to ask the seller to reimburse closing costs to buyer at close of escrow. Especially in light of the fact that the REO sellers insist on using their pre-designated title company (even though its no longer legal).

I hope this helps.

Erin Phillips
Keller Williams Realty
Web Reference: http://SoldByErin.net
0 votes Thank Flag Link Fri Jan 8, 2010
With the new Good Faith Estimate that is required as of Jauary 1st, you have columns to compare and shop closing costs. I suggest that you contact lenders that provide financing in the area you are looking at. From your question, I am not sure if you are looking in Las Vegas or Sacramento. Closing costs vary by state, more than anything else. A lender who loans in both of those states is most likely going to charge the same fee regardless of where you are buying, however there could be a big difference in title costs. You can collect information on closing costs from the various lenders, and compare them yourself. The important thing is how do these closing costs affect the rate you are being offered. One lender might quote a lower rate with higher fees. Each of the new Good Faith Estimates you collect, if completed properly, will also have an area where the lender can tell you what your rate, monthly cost and closing costs are with 3 different rates. Generally they would be 1 with no points, 1 with points, and 1 where they charge you a higher rate, but give you a credit towards closing costs. Each point is 1% of your loan amount.
Your closing costs will basically boil down to the following: lender and/or broker costs like application, processing, underwriting and points, if any. You will also have to pay for the appraisal. There will also be title fees, which as mentioned above, vary by state, and include searches, title insurance, recording fees, settlement fees, and assorted other title related items.
In addition, you will have what are considered pre-paid items. These are things like per diem interest to the end of the month you close, taxes, both adjusting to the seller, covering payments due within the first 60 days, and money that is held by the bank to set up your initial escrow account. You will also have to purchase a homeowner's insurance policy for the first year, and put money into escrow for your cushion towards year 2. If there is a need for flood insurance, the same goes for that. As far as any type of mortgage insurance, whether PMI or MIP, I have not seen this escrowed from my experience, but hypothetically someone could ask you to escrow 2 months of that.
If you are taking out an FHA loan, there is an upfront MIP fee, or Mortgage Insurance Premium, but that is generally added to your loan amount rather than you having to pay it at closing,
0 votes Thank Flag Link Fri Jan 8, 2010
Closing costs simply is all the fees accrued during a sale that it takes to close the deal. Closing costs are typically 3% of the purchase price and in today's market buyers are paying for all their closing costs and sometimes all the closing costs.

John & Sarena Villaescusa
Owner/Realtor/Broker
Keller Williams Realty
Cell: 562-818-2671
Email: Johnv@kw.com
Website: http://www.VGroupHomes.com
Web Reference: http://www.VGroupHomes.com
0 votes Thank Flag Link Fri Jan 8, 2010
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