When you are calculating costs of a purchase or a sale of your Twin Cities condo, loft, or townhome remember to factor in the closing costs that will be required for processing a mortgage loan, paperwork processing costs, government fees for sale deed and so on.
Under most circumstances, the cost of closing a residential real estate property sale deal will cost around 3 to 6 percent of total purchase price. Though most closing costs are standard, the actual cost of registration, paperwork processing, surveyor fees differ from place to place, you will have to keep aside some amount for meeting these costs.
A Minneapolis-St. Paul Real Estate Buyer’s Agent can give you some idea about closing costs, but I highly recommend you should ask your mortgage lender and/or your title company pertaining to your actual costs. Your closing costs can differ if you are paying cash or utilizing a mortgage loan product.
Typical closing costs for purchase of a new home or condo
- Loan origination fee – It is charged by banks and financial institution that is originating the loan and is processing the paperwork
- Credit report and loan application fee – It is charged by bank/financial institution for a credit report and applying for loan, which can be negotiated stating that already you are paying interest and loan origination fee.
- Mortgage insurance – If your down payment is less than twenty percent of property value, then you will probably be charged for mortgage insurance. It will protect the lender in case you default on payments and the lender is unable to sell the property for the deficiency balance amount.
- Appraisal fees – To estimate the actual value of a house, a lender will send a home appraiser to estimate actual value of the condo, townhome, or single-family home. The appraisal fee is either paid at the time of service or can be added to your final closing costs. You will need to discuss this with your mortgage lender.
- Homeowners insurance or HO6 Policy - Once the housing loan is approved, you will need to purchase a 12 month prepaid homeowner’s insurance, which will protect your home from natural disasters and fire hazards. Also, the lender will determine the number of months of homeowners insurance or HO6 insurance that will be collected at closing for the purpose of depositing it into an escrow account for future payments. You will need to contact your mortgage lender to find out specifically the number of months they plan to collect at closing for escrow.
- Property Taxes – The lender will collect and escrow a certain number of months of property taxes at closing to be held in your escrow account. You should contact your mortgage lender for additional information.
- Lender fees – Besides the loan application, you will have to pay the mortgage lender fees for approving your house sale and giving you a loan to purchase it and so on.
- Condo Association Move-In Fee – You will find some condo associations require a move-in fee paid at closing. The condo association documents will disclose the amount required.
- Title Fees – The title companies charge fees to close your transaction. Title closer fee, owner title policy, etc…
The best way for keeping closing costs to a minimum is to look for a condo/loft or a townhome that suits your budget, so you will be able to make a larger down payment to save on mortgage insurance costs so you will be able to negotiate better interest rates on your loan. Also, you will find certain title fees can be negotiated.