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About Closing Costs & Title Insurance in Indiana
About Closing Costs & Title Insurance: Closing Fees, Attorney Fees, Property Taxes, Interest, Loan Application / Origination Fees, Credit Report, Survey Fee
Congratulations on the purchase of your new home in Central Indiana! As your VIP Realty agent prepares you for closing, it is important that you understand two aspects of the closing process:
- Closing Costs - various fees that must be paid by the buyer and/or seller at the time of closing, and
- Title Insurance - protection for the lender and buyer against any future claims on the property
An Explanation of Closing Costs
Closing costs are usually associated and distributed at the time you take possession of your home. Upon completion of your mortgage application, you will receive a "Loan Estimate" that itemizes your projected closing costs. This is an estimate of costs only and does not signify the true amount of your closing costs, as they may vary by area. These costs can include:
- Attorney fees (yours and your lender's if applicable) - your attorney (or closing agent) will prepare and review the closing documents. These fees can range from $200-$500.
Some lenders may also charge fees for the lender's attorney services in connection to your mortgage. This is a fee you can negotiate down with the lender.
- Property taxes (to cover tax period to date)
- Interest (paid from date of closing to 30 days before first monthly payment)
- Loan application fee - some lenders may charge an application fee to process and finalize your mortgage application. This is generally a flat fee ranging from $75 to $500. Some lenders will refund the fee if you fail to qualify.
Tip: Avoid lenders that charge a percentage of
the mortgage loan amount.
- Loan origination fee - the points that you pay the lender for extending you a loan. A point is equal to 1% of the mortgage loan balance; e.g., $100,000 at 2 points equals $2,000.
This can be a significant portion of your closing costs. You can negotiate with the lender attain the lowest fee possible.
- Credit Report fee - lenders will pull your credit report to qualify you for a loan. The fee can range from $45-75, and is generally passed onto you once your application has been approved.
- Recording fees - pays for the recording of closing documents into the county records. This fee is about $50.
- Survey fee - pays the surveyor to show the exact boundary, location, and legal description. The cost can range from $200-$400 and may be paid by the seller in some areas.
- First premium of mortgage insurance (if applicable) - there may be two types of mortgage insurance:
- Mortgage Default Insurance, aka Private Mortgage Insurance (PMI) - protects the lender in the event you default on your loan. PMI is required for home buyers whose down payment is less than 20%. Costs may vary.
- Mortgage Life Insurance - names the lender as the beneficiary in the event of your death. This insurance may or may not be required as part of your closing and may be negotiable.
- Title Search and Title Insurance
- A title search ensures all parties that the property purchase is free and clear of all obligations; that no party has a claim on the house because of unpaid dues, legal suits, and other factors.
- Title search will be completed by an attorney or title company. However, some claims on your house can be missed during search. That is why the lender and you want
- Title Insurance protects your home from any claims that may occur in the future. Title Insurance is a one-time fee that you pay at closing.
- Both the Title Search and Title Insurance are combined into one fee that can range from $400-$700. For more information, read About Title Insurance, below.
- First payment to escrow account for future real estate taxes and insurance
- Paid receipt for homeowner's insurance policy (and fire and flood insurance if applicable)
- Any documentation preparation fees, including Notary Fees - The notary fee guarantees the signatures to the document. This fee can range about $50 or less.
Some closing costs are negotiable. You are more likely to negotiate lender closing costs than seller closing costs.
- In some "buyers market" where home sales are not as strong, you can often negotiate with the seller to pick up a portion of the closing costs.
- Closing costs can average around 7% of the home purchase price. These costs can vary widely from 3% to 10% depending on your location and whether you pay points.
- Closing costs are typically paid at the time of closing and can be a significant portion of your home savings. So budget and plan wisely.
About Title Insurance
Title insurance is usually required by the lender to protect them against loss resulting from claims by others against your new home. In some states, attorneys offer title insurance as part of their services in examining title and providing a title opinion. The attorney's fee may include the title insurance premium. In other states, a title insurance company or title agent directly provides the title insurance. The title insurance policy does not protect you. If you want to protect yourself from claims by others against your new home, you will need an owner's policy.
- Under the Real Estate Settlement Procedures Act (RESPA), the seller may not require you, as a condition of the sale, to purchase title insurance from any particular title company. Generally, your lender will require title insurance from a company that is acceptable to it.
- The title insurance company will issue a "Commitment to Insure" or preliminary report or "binder" containing a summary of any defects in title which have been identified by the title search, as well as any exceptions from the title insurance policy’s coverage.
- The "commitment" is usually sent to the lender for use until the title insurance policy is issued at or after the settlement. You can arrange to have a copy sent to you (or to your attorney) so that you can object if there are matters affecting the title which you did not agree to accept when you signed the agreement of sale.
- If you are buying a newly constructed home, make certain your title insurance covers claims by contractors. These claims are known as "mechanics’ liens" in some parts of the country.
- Lenders or title insurance companies often require a site survey to mark the boundaries of the property. A survey is a drawing of the property showing the perimeter boundaries and marking the location of the house and other improvements.
For more information about how VIP Realty can help you buy a home in Central Indiana, call Tammy Bookout at (317) 345 - 8269 or toll-free at 888-VIP-0002 (888-847-0002), or send Tammy an e-mail, or submit the Request for Information form below.