The Secret Behind Points And Closing Costs Part 5

The Secret Behind Points And Closing Costs

The Secret Behind Points And Closing Costs: Welcome To Part 5

Welcome back to the series. In the previous edition we have covered different secrets behind points and closing costs. Some of things you may have known, some you may not have known, and then some you have heard but did not understand.

If you have not read part 4, I recommend clicking here, The Secret Behind Points And Closing Costs, because the secrets will build upon each other.

With that out of the way,  let us continue with the series and uncover more secrets.

The Secret Behind Points And Closing CostsThe Secret Behind Points And Closing Costs: Escrow And Title

 

The fourth category includes your escrow and title charges. Escrow fees will range from $250 and $900, depending on the size of the transaction.

Expect between $100 and $160 for recording and $35 to $100 for courier services, depending on how many times the documents have to be couriered around.

Title insurance is frequently the second largest fee on the closing statement, next to the origination.

Title insurance can run you anywhere from $500 all the way to $3000 or more, depending on the value of the property.

 

The Secret Behind Points And Closing Costs: Non-recurring Cost

All of these fees constitute what’s called ‘non-recurring’ closing costs. That means they’re all one-time fees. There’s another category of fees called prepaid items or ‘recurring’ closing costs.

These are bills you would’ve had to pay at some point anyway. But because of the transaction, some of those bills are collected ahead of time.

These generally include prepaid interest, property taxes, hazard insurance and, in some cases, HOA dues.

The Secret Behind Points And Closing CostsThe Secret Behind Points And Closing Costs: To Impound Or Not to Impound

 

A major distinction with prepaid items is whether or not you have an impound account. An impound account allows your property taxes and hazard insurance to be collected at the same time as your mortgage payment. The obvious advantage is that you don’t have any surprise bills during the year and your monthly housing payment includes everything.

But the downside is that you have to put some money aside in a reserve account at the time the transaction closes. That means you have to bring more money in at closing, giving the illusion of higher closing costs.

In fact, it’s your own money and you’ll eventually get it back but it’s worth discussing with your Loan Officer before you get to the signing.

 

The Secret Behind Points And Closing Costs: Overall Decision

Overall, if you decide not to have an impound account, you can bank on closing costs and prepaid items between 2% and 2.5%. If you decide to include an impound account, you can expect between 2.5% and 3% in total closing costs and prepaid items. These are generalizations to be sure but they give you a fairly good idea of what to expect.

 

The Secret Behind Points And Closing Costs: Final Thoughts

We have covered a good amount of information in this article. However there are more secrets to be unleashed as we progress along in the series, “The Secret Behind Points And Closing Costs“. So be sure to look out for part 2 of this series. Till then Take care and have a great day.

 

 

Take Care And Have A Great Day

Dr. Gregory Stargell II

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The Secret Behind Points And Closing Costs

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