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The lender must disclose a good faith estimate of all settlement costs. A check to cover
your closing costs will probably have to be a cashier’s check. The title company or other
entity conducting the closing will tell you the required amount for:
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Down payment. |
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Loan origination fees. |
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Points, or loan discount fees you pay to receive a lower interest rate. |
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Appraisal fee. |
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Credit report. |
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Private mortgage insurance premium. |
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Insurance escrow for homeowners insurance, if being paid as part of the mortgage. |
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Property tax escrow, if being paid as part of the mortgage. Lenders keep funds for
taxes and insurance in escrow accounts as they are paid with the mortgage, then
pay the insurance or taxes for you. |
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Deed recording fees. |
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Title insurance policy premiums. |
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Survey. |
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Inspection fees—building inspection, termites, etc. |
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Notary fees. |
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Pro-rations for your share of costs such as utility bills and property taxes.
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A Note About Pro-rations: Because such costs are usually paid on either a monthly or
yearly basis, you might have to pay a bill for services used by the sellers before they
moved. Proration is a way for the sellers to pay you back or for you to pay them for bills
they may have paid in advance. For example, the gas company usually sends a bill each
month for the gas used during the previous month. But assume you buy the home on the
6th of the month. You would owe the gas company for only the days from the 6th to the
end for the month. The seller would owe for the first 5 days. The bill would be prorated
for the number of days in the month, and then each person would be responsible for the
days of his or her ownership.
What to Keep From Your Closing
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The Real Estate Settlement Procedures Act (RESPA) statement. This form,
sometimes called a HUD 1 statement, itemizes all the costs associated with the
closing. You’ll need for income tax purposes and when you sell the home. |
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The Truth in Lending Statement summarizes the terms of your mortgage loan. |
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The mortgage and the note (two pieces of paper) spell out the legal terms of your
mortgage obligation and the agreed-upon repayment terms. |
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The deed transfers ownership of the property to you. |
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Affidavits swearing to various statements by either party. For example, the sellers
will often sign an affidavit stating that they have not incurred any liens on the
property. |
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Riders are amendments to the sales contract that affect your rights. For example,
if you buy a condominium, you may have a rider outline the condo association’s
rules and restrictions. |
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Insurance policies provide a record and proof of your coverage. |
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