If you thought you were done with closing costs, think again:
- Attorney fees -- Both you and your lender will incur attorney fees. This charge ensures that your lawyer draws up the necessary documents and sets everything up properly for the closing. Your own closing attorney will represent your interests and may be present at, or may facilitate, the closing itself. The closing attorney collects all fees, transfers the deed to the buyer, pays outstanding taxes and utility bills, pays himself and all other closing costs and gives all remaining money to the seller. The attorney fees may range from $500 to $1,000 or more, depending on the purchase price of the property and the complexity of the sale.
- Home and pest inspections -- Your lender will probably require that the home be inspected to make sure it's both structurally sound and free of termites and other destructive insects. You may also have to have the water tested if the property uses a well rather than city tap water. In some areas, the water test means checking only the quantity of water available to the house, rather than the quality. If this is the case, you may want to have your own water quality test done.
- Homeowner's and hazard insurance -- You'll have to have these policies in place (and the first year's premium prepaid) at the time of the closing in most states. This insurance protects your (and the lender's) investment if the house is destroyed.
- Private mortgage insurance (PMI) -- If your down payment is less than 20 percent of the value of the house, you may be required to purchase mortgage insurance. This protects the lender in case you fail to make your mortgage payments. Premiums will usually be a part of your monthly mortgage payment and will be transferred into the same escrow account your taxes and homeowner's insurance fees are paid into. You have to pay these PMI premiums until you reach the 20 or 25 percent requirement -- or, they can go on for the life of the loan. (See the next section for more details on PMI.)
- Surveys -- Many lenders will require that the land be independently surveyed. This is just to ensure that there haven't been any changes, like new structures or encroachments on the property, since the last survey. These usually run $250 to $500.
Can you believe that we still have more closing costs to discuss? You'll find them on the next page.