Posted on: 21 July 2018
Buying a home is a major purchase decision that comes with its related price tag. In additional paying for the home, there are other associated costs that will come into play and be due at the time you sign on your home and take ownership. As your real estate agent walks you through the searching and negotiation process to make sure all details are considered when selecting your home, here are some costs you can expect to pay for at closing in relation to buying the home and why they are necessary.
When you buy a home, your mortgage company will require you to pay for your home owner's insurance and property tax on the property, as they have a vested interest in the property. So it is important these are paid.
To begin collecting for these balances that will become due, your mortgage company requires you to pay a couple months' worth of the premiums at closing, which are held in your escrow account. Your first mortgage payment is not usually due for up to two months, so you will need to prepay these in advance to cover the gap. Then, as you begin paying regular monthly payments for your property tax and homeowner's insurance each month, the escrow continues to hold these funds, so they can be paid appropriately when they come due.
Talk to your mortgage broker or real estate agent about how much you can expect these costs to be as part of your closing expenses. They can get an estimate from the title company and also look at the property's taxes from last year to give you a close figure.
Private Mortgage Insurance Premium
Today it is common more and more for first-time home buyers to get home financing without having to put a 20 percent down payment on the home. To protect the mortgage company in the event you default on your new mortgage, they have established a private mortgage insurance, which protects the bank if you default on your loan. This private mortgage insurance allows you to buy a home earlier without having to save up for years for the down payment.
And because your first mortgage payment is not going to be due for up to two months, at closing, you will be required to pay for your first month's private mortgage insurance. This amount will be added into your closing costs and due at the time of closing and settlement.Share