A Guide: Buying A Home

Estimating Closing Costs

One of the more confusing aspects of buying a home is calculating the closing costs. Many people don’t even know what it is they’re paying for. The tips below show you how to estimate closing costs, and show you where all that money goes.

Tips:

• Add up fees for loan processing, document preparation, tax service (to make sure the taxes are paid during the loan), flood service (to make sure the property is not in a flood zone), loan underwriting and wire fees (the cost of wiring money).
  
  
• Include fees for courier service, notary fees, appraisal, credit report and inspection fees.
  
  
• Add in the cost of title insurance and escrow fees based on the purchase price and loan amount. (Call a title company to get this information.)
  
  
• Remember property taxes. Depending on when the transaction closes, you may have to pay part or all of an installment.
  
  
• Include homeowner's insurance - also known as hazard insurance - for a year.
  
  
• Add in loan fees or points paid to the lender. (A point equals 1 percent of the loan amount.)
  
  
• By law, lenders are required to give you a written estimate of closing costs within 3 days of accepting your loan application.
  
  
• Depending on the state in which you live, a real estate attorney or a title/escrow company will be involved in the transaction.