You’ve found your perfect home, the seller has accepted your offer, your loan is approved, and you’re eager to move in. But before you get the keys, there’s one last step — the closing.
The closing, also known as the settlement, is when ownership of the property officially transfers from the seller to you. It’s an exciting step, but it can also feel a bit overwhelming. As a buyer, you’ll sign what seems like endless paperwork and present a substantial check for the down payment and various closing costs. While the down payment is typically clear, the closing costs can often be confusing. Many buyers find themselves handing over thousands of dollars without fully understanding where it all goes.
To help you feel more confident, here’s a breakdown of the common costs involved in closing on your home:
This fee covers the cost of the property appraisal. You might have already paid this as part of your loan application, but it’s something to keep in mind.
This fee covers the cost of the credit report the lender pulls as part of your loan approval process. It may have already been paid during your initial loan application.
This fee covers the lender’s processing costs and is typically about one percent of the total mortgage amount.
If you’ve opted to buy points to reduce your interest rate, this one-time charge applies. Each point is equal to one percent of the loan amount, helping to lower your monthly mortgage payment in the long run.
These fees cover the title search, title examination, and title insurance, as well as any associated document preparation and additional title services.
If you’re putting down less than 20%, the lender will likely require private mortgage insurance (PMI) to protect themselves in case of foreclosure. Once you reach 20% equity in your home, you can typically apply to have this insurance removed.
This covers the interest from the closing date to the day of your first mortgage payment. The earlier in the month you close, the higher this fee will typically be.
If you’re in an area that uses escrow accounts, your lender will set one up to hold funds for property taxes and homeowner’s insurance. You’ll likely pay a year’s worth of property taxes upfront, plus two months’ worth of homeowner’s insurance premiums. Taxes may be higher depending on how much of the year has passed.
Most states charge these fees to officially record the purchase and transfer ownership of the property. This ensures everything is legally documented.
Before you reach the closing table, make sure you have a conversation with your Realtor to understand which specific fees apply in your area. You also have the option to negotiate some of these costs with the seller during the offer stage. In some cases, the seller may even agree to cover all or part of these expenses.
My fiancee and I had been looking for houses that would meet our goals of finding a forever home. I had been in contact with Carolyn for over a year, but it was really after seeing a couple of houses that fit our criteria that she was able to bring a real gem of a property into focus for us. All through the process she was patient, answered all our questions, quelled our fears, and kept the process moving. Her style and attention to our emotions as well as the details of the transaction allowed the purchase of our dream home to unfold in a natural and successful way. I would definitely recommend her to friends and family if they are in the market for a new home. Thank you Carolyn.
“It happened just like that! Thanks to Carolyn and her team — we could not have been happier.”
We wholeheartedly recommend Carolyn Fischman to anyone looking to sell a home quickly and efficiently in the Albuquerque area.
Read more “And just like that… with Carolyn Fischman | Real Client Story”
Read more “Albuquerque Realtor Client Success Story: Above and Beyond Service”
