First-Time Home Buyers: Closing Costs 101 (Part 2 of 3)

Last week, we began a three-part series about the various closing costs that come with new home purchases. Part 1 in the series discussed mandatory costs - the ones required by law. This week, we look at costs which are not legislated, but are nonetheless hard to avoid if you want your real estate transaction to close successfully.

Closing Costs - The Ones You're Not Likely To Escape

  • Title Insurance - This one's not required by law, but most lenders won't issue a mortgage without it. This coverage protects both the buyer and lender against problems that may prevent a clear transfer of title.
  • Legal Fees - A lawyer carries out a number of necessary tasks in order to close the deal: reviewing documents and agreements, registering the deed and mortgage, transferring the funds, conducting title searches and so forth.
  • Appraisals And Surveys - An appraisal compares the sale price of a home purchase against its actual value. A survey details the size, shape and boundaries of the property. Although neither are legal requirements, many lenders won't finance a deal without one or both.
  • Home Insurance - Similar to how an auto dealer won't let you roll a new car off the lot without vehicle insurance, lenders typically won't release funds without proof that the home is covered for loss against perils such as a house fire.
  • Adjustments -At some point before the sale, the seller likely paid in advance for such costs as property taxes, condo maintenance fees or prepaid utility-related costs. After you take ownership, the seller will likely ask for repayment for their unused portion.

Now that we've looked at mandatory closing costs and the ones that are mostly-unavoidable, next week's post will end this three-part series with costs that are almost entirely at the discretion of the buyer.

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