It’s nice to know what your buyer costs are going to be before entering into the process. On the buyer’s side of the transaction, fees can add up quickly. Many of the fees may be associated with lenders fees to you. The fees vary from state to state and counties within those states. Remember that each situation is different.
Example of Buyer’s Expenses on a Purchase in Anne Arundel County
For this example I chose a sales price of $225,000. I made the assumption that the minimal down-payment for FHA was going to be used. I also included a deduction to the buyers expenses in the form of a sellers credit to the buyer closing costs. I’ll run through an brief explanation of charges, then I suggest you open the document below entitled Buyers Estimated Expenses.
A house location survey may be required by the lender, it shows where the house is situated on the lot. There is also the option of purchasing a more expensive boundary survey which is more detailed. The lender requires you have homeowners insurance on the property to cover loss in case the property gets damaged. The lender will be added as a loss payee so they are covered. This fee may or may not show up on the HUD 1, it may be paid by you prior to settlement but it is required.
When you obtain a mortgage on the property ist must be recorded in court records and the same with the deed of trust. The title company may require judgement reports to see if any judgements are against the buyer. The title company who prepares the deed and handles the settlement portion of the transaction charges a few for their services. There are some misc. fees to the buyer as well.
Buyers Title examination, Abstract, Title insurance and binder are all fees charged by the title company. Title insurance, the most expensive of these fees protect you against future claims from past owners regarding ownership. The Lenders portion of the title insurance is required where the buyers portion is not.
Transfer Taxes and Recordation Tax for home buyers is based on the sales price of the home. The seller pays a share of this however in the attached example you will only see the buyers share. In this example I assumed the buyer was a first time Maryland home-buyer. A first time Maryland Home-buyer is exempt from the state portion.
The lender will charge some sort of loan originating fee or points, the house needs to be appraised and the buyers will be charged for a credit report. A flood certification will determine if the property is in a flood zone and may affect your insurance coverage requiremnts.
That covers most of the closing costs for the buyer. There are additional cash outlays called escrow or accruals. These items are collected upfront to be deposited in your mortgage escrow account so the real estate taxes and homeowners insurance can be paid by the lender when they are due. After the upfront fees they are collected monthly in the mortgage payment.
See This Buyers Estimated Expenses Form for a detailed look at the estimate I used to demonstrate the buyers expenses when purchasing a home.
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