Closing Costs are fees associated with purchasing a property. You should expect to pay between 2-5% of the price of the home in closing costs! I am not saying that to scare you, but to prepare you! Once you sit down with a lender and get pre-approved for a mortgage, you should have a much better idea of what the closing costs will be so they should not be such a surprise just days before you go to close on your new home. 

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Closing costs are made up of two pieces:

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1. Title Fees and Lender Fees:

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Title Search- An attorney reviews the chain of title (transfer from past owners) to make sure that nobody else has a legal claim to the property and therefore you cannot buy it. ​

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Mortgage Inspection- The lender has someone examine the home for condition, if it is vacant, and any issues to make sure it is a good investment for them. After all, it is their property until you pay it off! 

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Title Insurance- This is a one time fee to insure the title of your property. This covers anything that could have been missed in the title search and protects your investment. For just a few hundred dollars, this lasts for the entire time you have a mortgage and own the property.

 

Processing and Underwriting Fees- Money paid for the processing and underwriting of your loan done by your lender.

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Appraisal- An independent third party appraiser goes to the property and assesses it for its value based on its uniqueness and likeness to other properties in the area. The value is used to qualify your loan amount. In short, in order to satisfy the lender to give you a mortgage, the property should appraise at or higher than your offer price. 

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2. Pre-Paids & Escrow Establishment

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Taxes- Taxes in Maine are paid biannually. Taxes are settled for closing based on the number of days you will be occupying the property for that tax period. The seller has already paid the taxes, meaning they are pro-rated. Because of this, you will simply pay the seller back for the days they have paid for and you will be living there. 

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Insurance- Homeowners insurance premium. You will need to have homeowners insurance in order to satisfy your mortgage requirements and close on the property. It is a good idea to shop around for the right coverage and price.

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First Months Mortgage Payment- Pretty straight forward; it's your first mortgage payment :) 

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****It is important to note that many folks opt to set up an escrow account for their monthly payment, also called a PITI payment. This stands for Principal/Interest, Taxes, & Insurance. You can elect to set up an escrow account through your title company so that your monthly payment includes your taxes and insurance so you do not need to pay them separately. 

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