Understanding Closing Cost...
"Closing" is the day you go to the title or escrow company, sign your name on the dotted line, hand over a check and prepare to take ownership of your new home.
It's also the day that you and the seller will pay "closing" or settlement costs, an accumulation of separate charges paid to different entities for the professional services associated with the buying and selling of real property.
You will usually be paying for such things as real estate commissions, appraisal fees, loan fees, escrow charges, advance payments such as property taxes and homeowner's insurance, title insurance premiums, pest inspections and the like.
The amount you pay for closing costs will vary; however, when buying your home and obtaining a new loan, an estimate of your closing costs will be provided to you pursuant to the Real Estate Settlement Procedures Act after you submit your loan application. This disclosure provides you with a good faith estimate of what your closing costs will be in the real estate process. An itemized list of charges will be prepared when you close your transaction and take title to your new property.
Closing costs can not be paid in installments. Many different parties will have fulfilled their responsibilities and be awaiting payment upon closing. The title or escrow company will disburse monies to those parties, pursuant to the escrow instructions, when funds are available.
Your closing funds should be in the form of a cashier's check made payable to the title company or escrow office in the amount requested. A personal check may delay the closing or may be unacceptable to the title or escrow company. An out-of-state check could also cause a delay in your closing due to possible delays in clearing the check.
It's NOT a law the you must purchase title insurance when you buy or refinance a home. However, virtually all lenders require title insurance for the face amount of their deed of trust, whether purchase or refinance. Prudent owners also value the protection afforded by the payment of the one time title insurance premium.
How much can you expect to pay for title insurance? This point is often misunderstood. Although the title company or escrow office usually serves as a meeting ground for closing the sale, only a small percentage of total closing fees are actually for title insurance protection.
Your title insurance premium may actually amount to less than one percent of the purchase price of your home, and less than ten percent of your total closing costs. The title policy is good for as long as you and your heirs own the property with the payment of only one premium.
Who pays what is not uniform in all areas. Sometimes the buyer will pay while at other times the seller will pay. In other counties the seller will pay for the owner's title policy and the buyer will pay for the lender's policy. But in every case, the question of who pays closing costs is a matter of agreement between the buyer and seller. Usually this agreement is based on the customary practice in your area.
Separate owner's and lender's title insurance policies are issued because both you and your lender will want the security offered by title insurance.
Your home is an important purchase, and you will want to be certain your home is yours, all yours. Title insurance companies insure your rights and interests in order to protect you against claims.
Your lender is looking to insure the enforceability of their lien on your property and marketability. What is meant by "marketability"? Local lenders will "originate" a loan here, and, often, sell it to an out-of-state investor. This investor, who may never see the property, needs to know that he has a valid and enforceable lien. Title insurance is the way of making certain. Without a current title policy, the loan is essentially unmarketable. |