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Closing Costs Information
Buyers may be expected to put down a deposit, sometimes called earnest money, at the time of the purchase and sale agreement to secure the property is presented. This money will be credited to the buyer at closing.
Buyers are typically expected to pay for any and all inspections performed on the building prior to closing. If, however, the seller agrees to pay for such inspections, such an agreement should be spelled out in the purchase and sale agreement. The cost of these and other inspections varies, but buyers should be clear about what inspections they will require, and what the cumulative costs will be. (see Section IV. Inspections Required & Recommended).
Aside from inspections, buyers will need to calculate the amount of down payment money needed to secure financing, and tax escrow expenses. Tax escrow in Massachusetts varies depending upon the month of closing. The following is what buyers can expect to put into escrow. For specific property tax rates, check with your REALTOR®.
If Loan Closes in the following months:
January 4 months, February 5 months, March 6 months , April 1 month, May 2 months, June 3 months, July 4 months, August 5 months, September 6 months, October 1 month, November 2 months, December 3 months.
For the purpose of demonstration, the following list has been prepared based upon a purchase price of $200,000, with a 20 percent down payment ($40,000), and the remainder of the purchase price to be financed. (Please remember that down payment figures may range from 5-25 percent, depending upon the source of financing.) Other charges also may vary, but this chart should demonstrate what buyers can expect. Check with your lender for the exact expenses your closing will cost.
Points are the pre-paid interest charged by many lenders and often vary from 0-4 points depending on the loan type selected by the buyer.
Points -1 point = 1% of the mortgage amount $3,200.00
Mortgage application $ no charge
Appraisal $ 250.00
Credit Report 50.00
Title insurance ($2.25 per thousand x loan amount) $ 360.00
Recording fees $ 60.00
Bank attorney $ 750.00
Plot plan/survey $ 150.00
Municipal lien certificate $ 30.00
Homeowner's insurance - first year premium payable in advance $ 400.00
Property taxes (approximately 3 months escrowed) $ 500.00
Underwriting fee $ 200.00
Tax service fee $ 105.00
The total estimated closing costs on this purchase is $6,055.00
Some other important notes regarding financing costs: PMI premium - private mortgage insurance is required if you finance more than 80 percent of the purchase price. Personal attorney is at the buyer's option and may cost between $500-$750. Buyers also will be expected to pay for any fuel oil remaining in the tank at time of closing.
Inspections
Inspections can include, but are not limited to, a building (home) inspection, well water inspection, pest inspection, radon and lead paint inspections, as well as a UREA formaldehyde foam insulation inspection. Additionally, the Commonwealth of Massachusetts now requires all homes with septic systems or cesspools to undergo a Title 5 inspection to insure compliance with local health ordinances.
Building inspections, though not required, are commonly used by buyers in order to get an unbiased professional review the condition of the property. Home inspections give you, the buyer, detailed information on potential problems and a means to evaluate the physical condition, structure and mechanical systems of the house.
In some cases, the cost of the home inspection, which often costs between $200-$500, can be applied as part of your down payment, as with a HUD insured mortgage.
Buyers should consider making a successful home inspection a contingency of their purchase and sale agreement in the event serious structural problems cause them to rethink their commitment.
Title 5 is the common name for a Massachusetts environmental code governing septic and cesspool use. Inspections are mandatory before any home serviced by a septic system can be sold or enlarged.
An inspection is required within 24 months prior to a sale or transfer. If weather prevents an inspection within this time period, one must occur as soon as weather permits, but not later than six months after the sale or transfer.
In most instances, systems that fail inspection must be repaired within two years. In addition, applications to install new systems require a soil evaluation test performed by an evaluator approved by the Massachusetts Department of Environmental protection (DEP).
The owner of the property is responsible for compliance with Title 5. The price of inspection is not regulated. On average one can expect to pay $300-$500 for a Title 5 inspection. However, the seller and the buyer may decide who will pay for the costs of the repair or upgrade, which can be negotiated as part of the sales agreement. Some mortgage lenders may require any repair or upgrade to be completed before closing or that the funds for the cost of the repair be placed in escrow before closing.
Financial assistance is available to aid property owners faced with Title 5 upgrades and repairs. Ask your REALTOR® what assistance programs, if any, are available in your area.
Additionally, in 1997, the Massachusetts Legislature authorized an income tax credit to ease the financial burden placed on homeowners. Eligible property owners can qualify for a tax credit of up to $6,000, or 40 percent of the cost of a septic system upgrade, whichever is less, over a five-year period. The credit applies to primary residences only.
Radon is a naturally occurring ground gas. Short-term tests include charcoal canisters, alpha track detectors, electrician chambers, continuous monitors and charcoal liquid scintillation. In most cases, an elevated radon level can be corrected simply and economically. Buyers who are interested in conducting a radon test should read the directions carefully and make sure they are followed.
Termites and pests also can be detected during the inspection process. This inspection can cost approximately $150, but may be well worth the money, particularly for older homes and/or if termite damage is detected at the home inspection. Termites and pests can be exterminated and prevented from returning.
Lead Paint. If you are purchasing a home built before 1978, the seller or REALTOR® will give you a state-approved Lead Paint notification form that explains this issue in more detail. You have the right to test the property for lead paint if you want. Massachusetts law requires that all homes where children under the age of six live must be lead-safe.
Closing the Deal
The process of closing the sale can take between 30-60 days (or longer), a length of time necessary for a number of critical legal requirements to be met, including clearing the title, recording the deed, approving loan applications, allowing the lender to make a property appraisal, and to have the plot plan surveyed.
A closing date will be set, at which time all the parties to the transaction must have completed their requirements to consummate the sale. The bank's attorney is responsible for conducting the closing, and will calculate and compute a number of financial requirements including at least some of the following:
Bank attorney's fees, check with your lender to find out what these will be
Recording fees for new deed and mortgage (approximately $60)
Appraisal fee, which is approximately $250, and which is required by Massachusetts state law
Credit report (approximately $50 each)
Private Mortgage Insurance (required for purchases with less than 20% down payment
Title search (often included in bank's attorney fees), and title insurance (approximately $1.50 per $1,000 of the mortgage amount)
Survey/plot plan (approximately $150)
Municipal Lien Certificate (approximately $25)
Real estate tax adjustments and interim interest (depending upon the number of days/months left in the year)
Buyers are not required to hire an attorney to represent them in the closing transaction, but may choose to as a precaution against any potential problems. The bank's attorney has an obligation to ensure all legal requirements are met, but represents the bank only and not the buyer. A buyer's attorney can review all the documents to ensure your needs, as a buyer, have been fully met.
Finally, the buyer should bring a number of items to the closing.
The buyer must present an insurance binder at the closing, covering the property for one full year.
The buyer should bring a certified check or bank check payable to him/herself for the closing costs and purchase price, less the amount of deposits and mortgage amount. The bank's attorney will give you an exact figure.
The buyer also should bring a checkbook in case there are any last minute adjustments, such as for fuel.
Article from marealtor.com
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