Closing
What are closing costs?
How can I save on closing costs?
Where do I get information about closing costs?
Who pays the closing costs?
Who gets the furnishings when a home is sold?
Title Insurance
Why do I need a title report?
What are closing costs?
Closing costs are the fees for services, taxes or special interest charges that surround the purchase of a home. They include upfront loan points, title insurance, escrow or closing day charges, document fees, prepaid interest and property taxes.
Unless, these charges are rolled into the loan, they must be paid when the home is closed.
How can I save on closing costs?
Studies show that the closing costs, which can average 2 to 3 percent of a total home purchase price, are often more costly than many buyers expect. But there are some ways to save:
- Negotiate with the seller to pay all or part of the closing costs. The lender must agree to this as well as the seller.
- Get a no-point loan. The trade-off is a higher interest rate on the loan and many of these loans have prepayment penalties. But buyers who are short on cash and can qualify for a higher interest rate may find a no-point loan will significantly cut their closing costs.
- Get a no-fee loan. Usually, though, these fees are wrapped into a higher interest rate though it will save you on the amount of cash you need upfront.
- Get seller financing. This kind of arrangement usually does not entail traditional loan fees or charges.
- Rent the property in which you are interested with an option to buy. That will give you more time to save for the upfront cash needed for the actual purchase.
- Shop around for the best loan deal. Each direct lender and each mortgage brokerage has their own fee structure. Call around before submitting your final loan application.
Where do I get information about closing costs?
For more on closing costs, ask for the "Consumer?s Guide to Mortgage Settlement Costs," Federal Reserve Bank of San Francisco, Public Information Department, P.O. Box 7702, San Francisco, CA 94120 or call (415) 974-2163.
Who pays the closing costs?
Closing costs are either paid by the home seller or home buyer. It often depends on local custom and what the buyer or seller negotiates.
Who gets the furnishings when a home is sold?
It depends. Fixtures, any kind of personal property that is permanently attached to a house (such as drapery rods, built-in bookcases, tacked-down carpeting or a furnace) automatically stay with the house unless specified otherwise in the sales contract. But anything that is not nailed down is negotiable. This most often involves appliances that are not built in (washer, dryer, refrigerator, for example), although some sellers will be interested in negotiating for other items, such as a piano.
Title Insurance
When you purchase a home, the seller is a person who has extremely strong ownership rights to the property, as do his family and heirs. There also might be additional individuals who have ownership rights to the property you are buying. These may include governmental bodies, or people who have unpaid claims against the property. The property thus may be sold without any of these part-owners knowing. However, if these part-owners surface and make a claim to the property, will you get clear title? Title insurance insures you, the buyer, against such cases. Title insurance companies protect you, first, by title searching for any possible part-owners, and second, by bearing the costs to settle any disputes over ownership not prevented by the initial title search.
Why do I need a title report?
As much as you as a buyer may want to believe that the home you have found is perfect, a clear title report ensures there are no liens placed against the prior owners or any documents that will restrict your use of the property.
A preliminary title report provides you with an opportunity to review any impediment that would prevent clear title from passing to you. When reading a preliminary report, it is important to check the extent of your ownership rights or interest. The most common form of interest is "fee simple" or "fee," which is the highest type of interest an owner can have in land. Liens, restrictions and interests of others excluded from title coverage will be listed numerically as exceptions in the report. You also may have to consider interests of any third parties, such as easements granted by prior owners that limit use of the property. Some buyers attempt to clear these unwanted items prior to purchase. A list of standard exceptions and exclusions not covered by the title insurance policy may be attached. This section includes items the buyer may want to investigate further, such as any laws governing building and zoning.
Escrow
Buyers and sellers have to deposit documents and money with a neutral third party to be held. When certain conditions agreed upon by both buyer and seller are met, the third party (the "escrow holder") then distributes the documents and the money. So after your offer has been accepted, you and the seller must agree on an escrow or settlement company to act as an independent third and ensure that each party receives what is due to them. Since this is a very important task to both you and the seller, you must both agree to the company and the fees they charge.
