Who pays closing costs, anyway? If this is something that you've been wondering about, stick around, because I'm about to break it all down for you, and I'm going to do that right now.
Hey, everybody. Welcome back to my channel. I am Jodie Cordell, the savvy agent, with Spence Properties here in Crestview, Florida. If it's your first time here on my channel, first of all, welcome. Welcome to my channel. I hope you find it very useful.
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So if you're looking into buying a house and you're wondering what are the closing costs and who pays those, well, I'm about to break it down for you. So let's get started.
So when you're buying a house, even with a VA loan, you're bound to be responsible for some things that you'll have to bring to the table to close the transaction. You're likely to have to be responsible for some fees and expenses that are going to be split between you and the seller during the course of the transaction. You're also going to have some fees from your lender, and that's going to be part of your closing costs as well.
The great thing about going through a transaction is that we typically as REALTORS® use a title company to be our escrow agent. And that is our person in the middle who is collecting all of the invoices and all the funds, and then they disperse at the end. This is what they will usually send to the buyers to let them know that they are responsible for.
First of all, your down payment. That's just going to be the amount that you need to bring that you're not financing in your mortgage loan.
Loan origination. That is actually coming from the lender. That's just a fee that they charge to start the loan process.
Points or loan discount fees. This is something that you'll do with your lender. If you buy points, it helps you get a lower percentage rate on your mortgage. And that's something that you may or may not have depending on what your credit score was when you started the home loan process. You may or may not need these discount points.
A home inspection. You'll have a period of time that they call the inspection period in the contract. And during that time, you'll want to run some things like your home inspection.
We always do a WDO inspection, which is wood-destroying organisms, and that's a whole other video. But basically, it's checking for termites and any other types of insects that can destroy the structure of your home.
And then you'll also probably need to do a septic inspection up here in these parts because most people here have a septic tank in their yard, an individual one.
So the home inspection is definitely one of those costs that are going to have to be paid in your closing.
An appraisal. Most lenders will require an appraisal to make sure that the home appraises for the amount that you're asking them to cover. The lenders just want to make sure that the collateral, which is your house, values at the amount of money that you're asking to borrow from the bank.
They'll ask you to pay for your own credit report.
Private mortgage insurance. Now, if you are not putting down at least 20%, you're going to be asked to pay PMI, unless you're using a VA loan. That is because the government guarantees that loan. So PMI is what it's known as. You're going to see that in your closing costs, and that is something that goes to the buyer.
Around here, most of us roll the insurance payment in with the mortgage payment. So when you set it all up with your lender, they're going to put three months' worth of insurance in your escrow account so it will already be in there.
Property tax escrow. You're going to end up having to pay some of the property tax. Property taxes are usually paid in arrears, which means that they pay after the end of the year. So the tax bill will come out at a certain time, and the seller will have to pay some of that, and then you'll have to pay some of that from the time that you take over. So you'll split that, and it's called proration. So you'll have your part of your property tax also in escrow. Your lender is going to keep the money for your taxes and your insurance in your escrow account throughout the year. So when you get your bill at the end of the year, you don't pay it. Your lender is going to take care of that for you.
Deed recording. This is actually the process of recording your deed with the county tax records. There is a fee for that. Underwriting and doc preparation. There's a fee for that.
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There may be a charge for a survey. If there isn't an existing one, you'll have to pay for that.
Notary fees. Yes, they'll charge you for that, too.
And prorations. I mentioned the prorations already. They're going to break down all the things that you're going to share between the seller and the buyer so that when the seller is in the home, they'll be responsible for their part, and when you take over ownership, then you'll be responsible for the rest of that. So those are the prorations.
So you'll end up having to pay those, depending on what time of the year and what part of the month you're actually taking over. It'll vary, because it'll be per day.
Typically the buyer's costs are going to include your mortgage insurance, homeowners' insurance, appraisal fee, and the property taxes, while the seller covers ownership transfer fees.
And also, their biggest fee is the real estate commission. And how that works is the real estate agent who's handling the listing of the house can charge anywhere between 5% to 8% and around here it's about 6%. And what they do is they take that 6%. They pay themselves, and then they pay the buyer's agent commission as well.
The seller also usually pays fees that are related to the property title, which is the legal document that secures the homeownership. And they usually pay for the transfer of that title over to the buyers. Typically, that's called a transfer tax.
And in some cases, the sellers will make some concessions to share some of these prepaids, escrow payments, and other closing costs with the buyer, and that's something that's negotiated in the contract negotiation process.
It's pretty typical in this area for buyers to ask for some of their closing costs to be covered, especially in our area, because we do deal with so many VA home loans, and many times the VA home buyers may not have that much cash to cover the closing costs. So they'll typically ask the sellers to help out, and that's standard practice.
I hope that helps break down some of the closing costs. If you have any more specific questions about any of the individual costs, I'd be more than happy to break down some of those fees for you and explain them a little bit in more detail.
And if you are thinking about moving to this area, please feel free to grab my free relocation guide to the Emerald Coast. You just click the link in the description under this video, and it'll take you right over there where you can grab it.
Again, thank you so much for watching my video. I hope you're enjoying all of this content and I hope to see you again next week. Again, my name is Jodie Cordell. I am the savvy agent here with Spence Properties in Crestview, Florida. And I'll see you on the next video.
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