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Closing Cost

Getting a loan has you going through a large amount of qualification paperwork and many other types of things to see it through.  One of the things that many people don't account for when buying a house is closing costs.  To help you better understand what closing costs are, let's go over the things that make up closing costs and why they get added to your closing amount.  

The first thing to understand is that nothing is done for free in this world.  That means that the loan officer helping you needs to get paid, the title company that you use to close needs to get paid and so on.  Closing costs are essentially all of these fees being charged to you when you get to the point that you can close on your loan.   

The origination and loan processing fees are some of what make up the main closing costs.  Most origination fees are paid out by the lender, but processing fees of all of your paper work are almost always charged to you when the loan is ready to close. Title fees are also charged.  This pays the title officers for drawing up the paper work, submitting it, getting it recorded by the county and so forth.  Another closing cost is that of your down payment and home insurance.  Every home must have homeowners insurance to protect it against fire etc.   The insurance company will usually charge you the first year's premium up front in order to meet the guidelines set forth by the lender to close the loan. 

While closing costs may seem as easy to just come to the table and pay them, unfortunately there is some red tape when it comes to paying them.  One cannot use cash, but they must use a cashier's check to pay these costs.  What's even more puzzling to people is that these costs must be paid with money that you have had sitting in a bank for at least 2 months.  This means that the money has to be seasoned, and if you are given money from a relative to pay them, you must go through a third party gifting agency.  The biggest reason for this is that the lenders want proof that you know how to save money, budget, and that you have had the money saved up for the purpose of closing on a home.  This initiative may sound a bit silly to some, but alas, it is a requirement from most banks as you must have the money to pay your closing costs before the actual closing date.  


  10 Steps to Home Ownership:

Step 1: Are You Ready?

Step 2: Hire a Realtor

Step 3: Get Loan Pre-approval

Step 4: Search for Homes

Step 5: Choose a Home

Step 6: Obtain a mortgage

Step 7: Make an Offer

Step 8: Insure Your Home

Step 9: Close the Deal

Step 10: Avoid Foreclosure


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