The Difference Bewteen Closing Costs and Pre-Paid Items
Posted on | July 14, 2009 | No Comments
Many people contact me and want to know why the closing costs are so high? The reality is the closing costs actually run about 3 to 4 % of the purchase price on homes in the $125,000 range and up. They are higher for less expensive homes because there are fixed costs that make the percentages higher on property that is inexpensive and lower on high dollar properties. The other thing most people do is roll in the closing costs with the pre-paid items that you have to pay when you purchase a home.
Pre-paid items are basically your taxes, home owners’ insurance expense and any interest that is applied for the month that you will be closing. Other closing costs are pass through costs and go straight to the party that is doing the work or the entity that is accessing a fee such as the title attorney, appraisal, recording and state tax and state stamp fees. When everything is said and done, the lender’s fees are normally between 1 and 1.25% of the value of the loan.
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