Closing costs: Buyer and seller are responsible

Question: Dear Kari, I have been saving for a down payment to buy a home and now I am ready! I was warned by my co-worker there are several hidden costs to watch out for. Could you please share this information with me? Answer: Buying a new home is exciting, but there are some big financial decisions to make besides the down payment. Some buyers do not know or forget there are many other costs that are included. These beastly costs are referred to as closing costs, fees incurred when buying a home and securing a home mortgage. Many folks wonder if it's the responsibility of the buyers or sellers to pay the closing costs. The answer is both are responsible for paying certain closing costs. This is not a law on who pays for what, yet what the norm is and traditional practice varies by the location of the property. Realtors know the norm of the costs the sellers and buyers each are responsible to pay. Any costs outside that scope may be deemed not common practice and would need to be negotiated and have nothing to do with the market value of a property. Here is a good general idea of the buyer's typical closing costs: • Escrow and title fees. • Owner's title insurance premiums. • Lender's title policy premiums. • Document preparation fees. • Notary fees. • Termite inspection fees. • General home inspection fees. • Property taxes, which could be collected up front up to eight months. • Recording charges, carrier fees. • Fire insurance premium one year up front. • Appraisal fees, credit report fees. • New loan fees and charges (each type of mortgage varies). • Private Mortgage Insurance (PMI): If you're making a down payment that's less than 20 percent. • Interest on new loan from date of funding to first payment date. • Home warranty for one year. • The buyer's California's supplemental tax bill will be due after the close of escrow. This bill covers the difference between the previously assessed values taxed and the newly assessed value of the purchased price of the home. Let's look at some ways buyers may avoid these upfront fees: Obtain a no-closing cost mortgage, in which you don't pay all of your closing costs. In this case, the lender offers this deal with a higher interest rate on the loan for not paying closing costs up front, or the lender may wrap the closing fees into the total mortgage owed, and then the buyer would end up paying interest on the closing costs. Another idea is to negotiate up front with the seller by asking them to pay your costs. The sellers are not going to just pay for your closing costs because they are nice folks, but the amounts will be built into the sales price. Keep in mind in this case the home must appraise for the necessary value needed for the seller concessions to work. If not, then the deal may be dead or further negotiations must take place. When you consider buying a home, make sure to be armed with knowledge before shelling out too much money at closing. Some lenders will allow 3 percent (some more) of the purchase price being credited back to the buyers through the close of escrow by the seller. Make sure you check with your lender before you and your Realtor write your purchase offer; this way, you will know all your options up front. I wish you the best in your buying adventure! Kari McCoy, CRS, owns the Kari McCoy Group