Closing Costs
Expenses incurred by the buyer and seller in a real estate or mortgage transaction over and above the price of the property. There are two types of costs: recurring and non-recurring. Nonrecurring costs are one-time transactional costs which include discount and origination points; lender fees – underwriting, processing, document preparations, flood certificate, tax service, wire transfer, courier, etc.; title insurance fees; escrow; attorney or closing agent fees; recording fees; inspection and appraisal fees; and real estate brokerage commissions. Recurring fees are costs associated with owning the property and they recur month after month. These costs may include hazard insurance taxes, mortgage insurance (PMI), and association fees. A pro-rated amount of these fees may have to be paid at closing, including pre-paid interest (interest charges from the date of closing to the end of the month) property taxes if due; and hazard insurance, fire insurance or homeowner’s insurance (has to be paid for one year). Mortgage insurance (PMI) may be required if the loan amount is more than 80% of the value of the properly. In the past, a whole year of PMI had to be paid up front, however, in recent years, many PMI companies only require l-2 months up front. Mortgage insurance premiums are normally paid every month with the loan payment. An impound account to be set up with money for future payments.