Buying A Home In Peoria Il– What Cost Should I Expect At The Closing?
Buying a home in Peoria Il can be very exciting but may also make you feel a little uncomfortable. This is especially true if it is the first home you have ever purchased. Most of us buy just a couple of homes in our lifetimes. Therefore, this is not something we do every day. It is natural to have questions about the home buying process. One of those questions is….. what cost should I expect to incur to when I purchase my house?
The U.S. Department of Urban Development has created a very clear settlement statement outlining the key categories of cost that are incurred when buying and selling properties. It is called a HUD-1 statement. It is the statement that the Escrow Agent will use to itemize all the charges that you can expect to pay. You can get a copy of the HUD-1 statement at https://portal.hud.gov/hudportal/documents/huddoc?id=1.pdf . Key categories on the HUD-1 statement that effect the buyer is discussed below.
There will be a summary of the charges for the buyer and seller right up front in the documents. These summary charges are then explained on the following pages. Prior to the actual closing for the property, this HUD-1 statement will be sent to you. You should review the charges and make sure you understand them. If you don’t, ask your Realtor to explain them. If you still have questions, contact the Escrow Agent that will be handling your closing and that person explain it to you. Don’t be bashful, you have every right to make sure you understand these charges and that they are correct.
Following the summary charges will be a detailed breakdown of the charges. This breakdown is arranged in Key Categories. These Key Categories include the following for the buyer.
Items Payable in Connection with the Loan
When buying a home in Peoria Il and you are taking a loan out on the property, the lender will have several items that the buyer is expected to pay. These charges can be broken down into the charges to create the loan and the charges that provide protection to the lender. Charges to create the loan include a “Loan Origination Fee” and a “Loan Discount Fee (Points).
The loan origination fee is typically 0 – 1% of the loan. The Loan discount fee (commonly known as points) is typically 0-3% of the loan. The Loan discount fee is a charge that the buyer chooses to pay to reduce the overall interest rate of the loan. Therefore, it is completely negotiable. My personal thoughts on both of these is to shop around until you find a lender that will give you a loan with a good interest rate and no charges for a Loan Origination Fee or Loan Discount Fee.
The other items a buyer is expected to pay to protect the lender include an appraisal fee, credit report, mortgage insurance, tax tracking fees among others. The key charges are the appraisal fee, typically around $400 – $700 dollars depending on the property and appraiser. The tax tracking fee is a fee that the lenders pays to a service that lets the lender know that the real estate taxes are being paid every year. The lender may ask for mortgage insurance. Do your best to negotiate this fee away. If you have good credit, there should be no need for mortgage insurance.
Title Charges
The next major category of charges is related to obtaining a good Title to your property. The largest of these is the Title Insurance. I recommend getting Title Insurance for this helps ensure you have a good title. The Charge is approximately $1500 dollars depending on the property. With title insurance, you know that the Title Company has researched the title of your property and that there are no encumbrances against your property Title. In Illinois, the seller typically pays for Title Insurance but this varies from area to area. This is a negotiable item. Make sure you clarify who is paying for the Title insurance when negotiating the purchase and sale agreement.
You will also be charged an Escrow fee. This is a fee to pay for the services of the Escrow Company in handling the closing of your property. This fee is typically divided between the buyer and the seller. You can expect to pay approximately $350 dollars for you portion of the service. You will have other miscellaneous fees of about $50 dollars
There are other miscellaneous charges that are relatively small in cost. One of these will be the recording charges. Expect to pay about $50 dollars for these fees to cover the cost of document shipping fees and e-recording etc.
Government Recording and Transfer Charges
The Government Recording Fees and Transfer Charges cover the fees to pay for the recording of the Deed to the property and the Mortgage at the local county courthouse. These fees will cost approximately $125 dollars.
Additional Settlement Charges
These fees will cover miscellaneous items. If you chose to have a property survey conducted, that fee would be accounted for here. A Property survey will cost about $500 dollars. If you had home inspection or pest infestation inspection, those costs would be included here as well. A home inspection will cost about $450 dollars and pest infestation inspection will cost about $200 dollars. Each of these costs depends on the contractor hired to complete the service. Finally, if your new property belongs to a HOA, then the HOA transfer fees would be accounted for here. This fee depends on the HOA and what they charge.
A key cost that I have included in the above is the proration of property taxes. Property taxes are paid in arrears and the seller needs to provide money to the buyer to pay for the portion of the property taxes that the seller is accountable for but has not paid. The amount to be paid is dependent on the date of the transfer of the property. I suggest you set down with your attorney or Realtor and have them explain that process to you and give you a rough estimate of those cost.
The closing cost can be significant for the buyer. On a recent property we purchased, the closing fees for us as buyers approached $3000 dollars. Thi did not include the proration of the property taxes.
When buying a home in Peoria Il, I suggest you get a copy of HUD-1 statement before you buy your house. Then also get preapproval from your lender as to how much you can afford to borrow from the lender to pay for your house. This way you will know how much you can afford to pay for a house and how much money you will need at the closing. You can work with the lender and potentially borrow enough money to cover the closing cost as well. Knowing what you are expected to pay at the closing can help you negotiate the right price for the house and terms for your loan.
I am not an attorney so seek the advice of your attorney as you go through the closing process. The above is intended to give you insights to potential cost and items to ask further questions on.