Understanding Home Buying Settlement
Although people often use the terms closing costs and settlement costs interchangeably, they actually refer to separate circumstances. Both of these terms, however, are part of the process of buying a home.
Closing costs refer to the expense of obtaining a loan for the purpose of buying a home. These costs are customary in the lending industry and are similar across lenders. Therefore, borrowers are going to pay relatively the same amount of money to obtain a mortgage no matter which bank or lender is involved. Typically fees included in closing costs include:
. Private mortgage insurance
. Origination and discount points
. Documentation fees
. Recording fees
. Title search and title insurance fees
The phrase “settlement costs” refers to the fees associated with finalizing the purchase or sale of real estate. Both the buyer and the seller are required to pay certain fees during settlement. The fees charged at settlement include but are not limited to the following expenses:
. Prorated real estate tax
. Documentation charges
. Recording costs
. Inspection costs
. Escrow Fees
. Pre-paid interest charges
. Financial reserves for homeowner’s insurance and real estate tax
. Commission fees
. Down payment
Typically, the amount paid by sellers and buyers is different, since each party is responsible for a different list of fees and expenses. A document known as the closing disclosure provides an approximation of the costs to be expected at settlement.
Buyers and sellers of homes are responsible for a number of fees that must be paid at the time of settlement. These fees are known as settlement costs. Buyers must also pay closing costs, which have accrued as the result of obtaining a mortgage.
In addition, keep in mind that each County is different as to who customarily pays for what. For example…Santa Clara is a Seller pay county, Alameda is a Buyer pay county and San Joaquin is a 50-50 pay county.
For more information contact Mona Koussa.