BUYER BEWARE 2: Closing Costs Exposed

Okay, so you've put an offer on your dream house and it's been accepted by an elated seller. Both parties have executed an iron clad purchase and sale agreement with the assistance of legal counsel and the home inspection has been completed and there's no bad wiring or leaky pipes. You may have already received the much anticipated mortgage commitment from your lender. Now you just have to sit pretty and await the closing date, right? WRONG! Now it's time to hustle and get the money together to complete your purchase. You're thinking, "Duh, I know I've got to come up with rest of the purchase price less the loan amount. This lawyer's not telling me anything new."

No, what I mean is that in addition to the purchase price funds, you've got closing costs, prepaids and escrows that most buyers don't even think about and often don't learn about until 24 hours before the closing because of lenders that don't communicate well with borrowers. Most buyers can expect to come up with several thousand dollars to cover these extra items, which typically include: legal fees; title insurance; title examination; private mortgage insurance; lender fees; reimbursement to the seller for home heating fuel and prepaid taxes; mortgage plot plan; courier fees; homeowner's insurance; and interest.

While closing costs really can't be avoided. There are ways to make them a little easier to swallow. One possibility is to ask the seller for a closing cost credit at the time the offer is made. If the seller agrees, the closing cost credit is applied at closing to reduce the closing costs payable by the buyer. Another option is to request that the seller pay for certain of the closing costs such as the homeowner's insurance policy. While a seller doesn't have to agree to give a credit, doing so costs him or her virtually nothing since it doesn't necessarily have to reduce the purchase price and it can help to ensure that the buyer has enough money at the closing table so that the deal ultimately goes through. One caution to buyers has to do w/FHA mortgages, which place limitations on how closing cost credits are applied. For instance, they can't be applied to prepaid annual PMI and often can't result in the buyer getting cash back at closing.

So what's the bottom line - think about your bottom line from day one of your real estate transaction so that you'll have enough money to close the deal or else you'll be left without a roof over your head!