This was originally published on Monday, December 10, 2018, in the Pacific Daily News. Click here to subscribe to the PDN.
When settling the purchase of a home, closing costs are charged to both the buyer and the seller to compensate the parties involved in funding, approving and insuring the sale. They are not included in the purchase price of the property. Before closing on your home, discuss what your closing costs are and how much the additional fees will total. Here are more closing costs that you could be responsible, in addition to your final purchase price.
Loan origination fee. This fee covers the lender’s administrative costs of preparing the required documents for the loan and the closing paperwork. The average cost of the fee is usually 1 percent to 2 percent of the loan amount.
Pest inspection. This fee covers the cost to inspect for termites or dry rot, which is required in some states and required for government loans. Repairs can get expensive if evidence of termites, dry rot or other wood damage is found.
Private mortgage insurance. Depending on how much of a down payment you make, you may be required to purchase private mortgage insurance. In most cases, it will be rolled into your monthly mortgage payment. Your loan provider usually requires you to have private mortgage insurance to protect lenders against loss if a borrower defaults.
Recording charges. State and local governments charge this fee to record your deed, mortgage and loan documents regarding the sale.
Survey fee. A survey is a drawing or map showing the precise legal boundaries of a property and other details. If an existing survey of the land can’t be obtained, a new survey will have to be conducted. Your lender may require you to have the land surveyed to ensure the boundaries are where they are supposed to be and there are no legal issues.
Title insurance. On Guam, it’s common for property to be passed down from generation to generation without being recorded or going through the proper legal channels. Title insurance ensures the property you are buying is free and clear of any claims, taxes or property disputes.
Transfer taxes. This is the tax paid when the title passes from seller to buyer.
Underwriting fee. This also goes to your lender, covering the cost of researching whether or not to approve you for the loan.
Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 24 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at firstname.lastname@example.org and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.