You've found your dream home, the seller has accepted your offer, your loan has been approved and you're eager to move into your new home.
But before you get the key, there's one more step called the closing. Also called the settlement, the closing is the process of passing ownership of a property from the seller to the buyer.
As a buyer, you will sign what seems like endless piles of documents and will have to present a sizable check for the down payment and various closing costs.
Appraisal Fee: This fee pays for the appraisal of the property. You may already have paid this fee at the beginning of your loan application process.
Credit Report Fee: This fee covers the cost of the credit report requested by the lender. This too may already have been paid when you applied for your loan.
Loan Origination Fee: This fee covers the lender's loan-processing costs. The fee is typically one percent of the total mortgage.
Loan Discount: You will pay this one-time charge if you have chosen to pay points to lower your interest rate. Each point you purchase equals one percent of the total loan.
Title Insurance Fees: These fees generally include costs for the title search, title examination, title insurance, document preparation, and other miscellaneous title fees.
PMI Premium: If you buy a home with a low down payment, a lender usually requires that you pay a fee for mortgage insurance. This fee protects the lender against loss due to foreclosure. Once a new owner has 20 percent equity in their home, however, he or she can normally apply to eliminate this insurance.
Prepaid Interest Fee: This fee covers the interest payment from the date you purchase the home to the date of your first mortgage payment. Generally, if you buy a home early in the month, the prepaid interest fee will be substantially higher than if you buy it towards the end of the month.
Escrow Accounts: In locations where escrow accounts are common, a mortgage lender will usually start an account that holds funds for future annual property taxes and home insurance. At least one year advance plus two months’ worth of homeowner's insurance premium will be collected.
Recording Fees and transfer taxes: This expense is charged by most states for recording the purchase documents and transferring ownership of the property.
Buying a condominium can be a smart start to being a homebuyer, without many of the maintenance hassles of owning a detached home.
Insurance through the homeowner association, or HOA, covers some areas of the complex, though each homeowner must have their own insurance to cover certain parts of their property and their belongings.
Here’s a breakdown of how condo insurance works:
Group insurance: Condo association insurance usually covers common areas, such as a pool, lawn and building exteriors.
This insurance is called the “master policy” and doesn’t include what’s inside your condo unit — such as a break-in, water damage to your kitchen walls, or someone slipping on your wet bathroom floor.
Condo unit insurance: Everything inside the walls, such as the plumbing and electrical wiring, is covered by your individual insurance policy, though some master policies may cover from the paint on the inside of your unit to the outside walls.
An individual homeowner’s insurance policy will also cover your belongings that you keep inside your condo, along with any fixtures or improvements you make to your unit.
When valuing your possessions, consider the replacement cost in today’s dollars for new items, not what they originally cost. Some policies only reimburse for actual cash value, which is the depreciated value, and not the total replacement costs.
Insurance coverage for personal belongings and the physical building typically range from $25,000 to $100,000, with premiums at $400 to $600 per year. Owning artwork or other collectibles could require additional coverage.
Liability coverage included in condo insurance will typically cost $20 a year for $300,000 in liability coverage.
Loss-assessment insurance: This covers insurance expenses not covered by the condo association, or in excess of the group coverage. You may need it if the condo association insurance doesn’t cover a major repair and the HOA doesn’t have enough money to pay for the repair. Instead of paying extra for the fixes, your loss-assessment coverage would cover you.
Loss of use: This type of insurance pays for a place for you to stay if your unit is totaled or severely damaged by a tornado or some other disaster. Coverage may be limited to a dollar value or your actual costs for a specified time.
When determining how much insurance you need for your condo, start with your condo associations’ master policy and then fill in the holes from there. This real estate information will help ensure your investment and your belongings are well protected.
103 Laurelbrook Rd
Cherry Hill, NJ 08034