Making Moves is a big decision and a lot more goes into figuring out the financial side of things than just the purchase price of your new home. One additional expense to account for is covering your closing costs.
To help you stay prepared, we’ve put together this simple rundown of the most common closing costs along with a brief explanation of why these fees are not included in the listed price of a new home.
We’ll also share an easy way to save thousands on closing costs when you purchase a new Taylor Morrison home in 2020.
What are Closing Costs?
Closing costs are the fees and charges due at the end of a real estate transaction when the title of the property is passed to the buyer. While some of these fees are covered by the seller, most are the responsibility of the buyer.
Typically, these costs can be divided into three categories: property related, loan related and title insurance related.
How much you’ll pay in closing costs depends on many factors, including the location of your home, local tax laws, the home itself and the type of loan you originate to finance the purchase. Closing costs are variable, depending on your unique situation. This is why they are not included in the listed price.
On average, Americans pay between 2% and 5% in closing costs when purchasing a new home.
Common Closing Costs
Understanding which fees are included in the closing costs can help you budget for the expense and make your home buying experience as stress free as possible.
While this list doesn’t include every possible closing cost related to buying a new home, it’s a great start for learning the basics:
The processing fee covers the cost of processing all documentation related to your mortgage application.
The underwriting fee is what you pay to your lender to approve your loan. This fee covers the cost of reviewing and validating your qualification for the loan.
As part of the loan application process, your lender will need to order a tri-merge credit report from all three of the major bureaus to check your credit history.
Appraisal with Final Inspection
The lender needs to verify you are paying market value for you home and the comparable sales in the surrounding neighborhoods meet qualification guidelines. Your down payment requirement is determined by the purchase price or home value, whichever is less. You will be responsible to pay a third party appraisal management company at the time the appraisal is ordered prior to closing on your home. If purchasing a new build home, it is likely your home is not 100% complete. Prior to your closing, it is necessary to certify your home is 100% complete by asking for a secondary report called “final inspection” certifying your home is move-in ready.
A surveying company is often hired to double check property lines and confirm the location of shared walls or fences. A survey will confirm that the properties physical boundaries match the deed.
Attorney Review Fee
Some states require that a real estate attorney draws up or reviews home purchase agreements and contracts. Even when it’s not required by law, involving an attorney in your real estate transaction is a good idea.
Also known as the closing fee, a settlement fee pays to conduct and handle the closing, including documents and dispersing funds.
The courier fee facilitates the physical transportation of signed paper documents between the buyer, the seller, the lender, escrow and any other involved party that requires access to the documents.
Title-Doc Prep Fee
Paid to a title company, the document preparation fee covers everything that goes into researching a title to ensure that it is free and clear of liens or other defects.
Owners and Lenders Title Insurance
Title insurance protects the policy owner against undiscovered issues with a property’s title. One of the most common problems being unpaid property taxes. Both the lender and buyer must purchase separate policies in order to be covered.
Title Endorsement Fee
A title endorsement adds coverage or removes exemptions from title insurance to match a specific property’s unique situation. The title endorsement fee covers any necessary changes to the policy. Standard title insurance covers for recorded liens not listed on the policy, errors in the deed and fraudulent deeds but may not include specialized coverage required by the lender.
Recording fees pay to legally record the new deed and mortgage documents.
Government Transfer Fees
Depending on the location of the property, the state or county government may assess a transfer fee to complete a real estate transaction. Typically, this fee is calculated based on a percentage, meaning the cost goes up depending on the price of the home.
Be sure to double-check your Closing Disclosure to compare your final loan offer with the original loan estimate provided at application. Required by the Consumer Financial Protection Bureau, your lender must deliver your Initial Closing Disclosure three days prior to closing. A Final Closing Disclosure will be provided on the day of your closing.
For most loans, the buyer will have the option to pay points at the time of closing to buy down their interest rate. Buying points makes financial sense for buyers who plan to hold their mortgage for a long time and who have more money to put down now and would prefer a smaller monthly payment.
Some buyers will choose to receive points, too. Receiving points is when your lender provides additional credit to cover other closing costs. This option requires a higher monthly payment but can be a smart idea for buyers who don’t have the money to pay closing costs out of pocket.
A zero-point loan is for buyers who are satisfied with the current market interest rate. One advantage of zero-point loans is that they make it easier to compare lenders.
Taylor Morrison Wants to Help You to Make Moves Stress Free
Depending on your lender and the seller, some closing costs may be negotiable. Shopping around for service providers can help, too – but realistically, the only surefire way to save a significant amount on closing costs is to find a seller willing to pay them.
And right now, America’s Most Trusted Home Builder is doing just that. For a limited time, we’re paying thousands of dollars in closing costs to help home buyers get into their dream home for less.
Hurry to take advantage of this exciting opportunity and learn more about our no closing costs offer in every market where we build new homes.
Additional Helpful Information
- Future Homeowner? Here’s What You Need to Know.
- Find Your “That’s Me” Home Type
- Too Cool for School – How APR Works
*All Closing Costs Limited Time Incentive (the “Promotion”) valid on new home contracts entered into as of 1/6/20-2/29/20 and applies to all eligible Showcase/Move-in Ready homes that close on or before 3/31/20 (“Promotion Period”), if (1) qualified buyer of an Eligible Home chooses Closing Agent selected only by Seller and finances with Seller’s affiliated lender, Taylor Morrison Home Funding, LLC, NMLS #149227 (“Affiliated Lender”) and (2) satisfies all other closing date and eligibility criteria (each, an “Eligible Home”). All Closing Cost Promotion includes both the Standard Closing Cost contributions and the Additional Closing Costs provided in the Purchase Agreement to buyers using Affiliated Lender, as well as the Title Company selected only through Seller. Seller will pay all closing costs at closing, excluding discount points, pre-paid items, HOA Dues, Capital Contribution and Transfer/Disclosure Fee which total contributions will vary depending on the Eligible Home selected and other restrictions described below. Total closing cost contribution subject to Seller’s contribution limitations based on mortgage program. Buyer must pre-apply with Affiliated Lender before submitting offer to qualify for the Promotion. Buyer is not required to finance through Affiliated Lender or to use such Closing Agent selected by Seller to purchase a home; however, Buyer must use both settlement services to receive the Promotion. All loans are subject to underwriting and loan qualification of the lender. Services not available in all states. Rates, terms and conditions offered are subject to change without notice. Additional licensing or other financing details regarding Affiliated Lender may be found at www.taylormorrison.com/aba. All information (including, but not limited to prices, views, availability, incentives, school assignments and ratings, floor plans, site plans, features, standards and options, assessments and fees, planned amenities, programs, conceptual artists’ renderings and community development plans) is not guaranteed and remains subject to change or delay without notice. All homes subject to prior sale. Please see a Taylor Morrison Community Sales Manager or visit www.taylormorrison.com for additional disclaimers, licensing information or other details (as applicable). Offer void where prohibited or otherwise restricted by all applicable state and federal laws. Taylor Morrison Home Funding, LLC, NMLS #149227 is licensed in the following states: AZ #0916681; CA: DBO #4131114; CO: #347943; FL: MLD72; GA #45542, NC: #L-166652; SC: #149227, TX: #1040362, 336785, and 885815 (branch located at 2929 Briarpark Dr., Ste. 400A, Houston, TX 77042). Additional license information available at NMLS Consumer Access: www.nmlsconsumeraccess.org. © January 2020, Taylor Morrison, Inc. All rights reserved.