Closing cost logistics confusion

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Closing cost logistics confusion

Post by workingovertime »

Might be a dumb question but this is only our 2nd time buying a home and I was not really involved the 1st time.

Is the closing cost estimate that lender give you supposed to be paid all at once at closing OR is it just an overall estimate that they give until closing date and buyer/seller pays as incurred?

For example, mortgage broker ordered appraisal for us today and asked us to pay $485 appraisal cost on applicable website, which we did. No big deal. Then I realized that $485 appraisal cost is already listed on the closing cost estimate they gave us last week. I thought closing cost is something that you just pay up on the day of closing, is this completely incorrect? Should I be expecting to pay parts of these closing cost as we go? This is relevant to us because 1) it's just good to know and 2) We run a very low balance checking account and each large payment requires me to move fund from savings to checking and they only allow 6 per month before charge.
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Re: Closing cost logistics confusion

Post by celia »

All the money needs to be paid before escrow will close. (I would rely on escrow's closing costs rather than the lender's, since It might be more comprehensive.) As the buyer, you should have extra money available for things that are unknown upfront.

However, some costs are pay-as-you go, in case the sale falls through. Those service providers (appraisers, inspectors) still have to be paid even if the sale doesn't complete. Others, such as pro-rated property taxes and HOA fees, are just adjustments between buyer and seller and will disappear (to the buyer) if the sale doesn't complete. These will be most visible on the disclosure form if the closing date is moved a week or two.
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Re: Closing cost logistics confusion

Post by jfn111 »

The escrow company will give you a RESPA form with "Cash to Close". There is generally credits back and forth between buyer and seller for things like property taxes, HOA fees, closing costs negotiated in the contract etc..
Appraisals are the most common item to be paid up front. Inspections are usually up to the buyer and are not handled by the lender.
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Re: Closing cost logistics confusion

Post by nolesrule »

Anything that was paid outside of closing with be listed as such on the final Closing Disclosure, which include the actual amount of Cash to Close.

All of the Estimates you see in the meantime tend to change and get updated regularly as more specific information about costs becomes known.
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Re: Closing cost logistics confusion

Post by Golf maniac »

Typically lenders will require you to pay for the appraisal upfront and maybe an application fee. All those costs will be shown as paid on your final documents. The remainder you pay for at closing.
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