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Closing costs aren’t something everyone understands. Most buyers know that they will have to pay something on top of a mortgage loan and the house price. While some people underestimate the overall costs of purchasing a home, there are others that overestimate these costs as well as other expenses related to a real estate transaction and that might scare them away from thinking of purchasing a home. This article is focused on helping you understand everything there is to know about closing costs and important things you should know about closing costs associated with a real estate transaction in Atlanta, GA.
As far as the total closing costs are concerned, these vary based on the mortgage lender, location, loan amount and type of mortgage loan. Click here to go to our Closing Cost Calculator to get a more accurate estimate of the overall closing costs. This calculator also displays the average mortgage rates prevalent in Atlanta.
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As a rule of thumb, buyers should expect an amount ranging from 0.5 to 5.0% of the total mortgage amount as closing costs. All these extra fees including the title fee, lender fee as well as other service fees are required to be paid upon closing of the transaction along with the down payment. In total, you will be paying the down payment as well as the closing costs when buying a home.
There are particular mortgage types as well as some lenders that allow borrowers to roll in either a part or all of the closing costs as a part of the total mortgage. It’s an excellent option if you want to spread out these costs over the total mortgage. Needless to say, it will increase the monthly mortgage payments and the total amount of money that needs to be paid back over the life of the mortgage.
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Home Refinance Loans – Closing Costs
Every home refinance deal is also associated with closing costs whether you’re swapping it to get a mortgage at a lower rate or cashing out a part of your home equity. The closing costs aren’t as high as those associated with a completely new home purchase but you should consider these costs when calculating costs for the mortgage refinance loan.
Standard Closing Costs in Atlanta
This section contains most of the closing costs and fees associated with buying a home in the city of Atlanta or any other place in Georgia.
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Loan Origination
A nominal fee will be charged by the mortgage lender for setting up the mortgage account and this is known as loan origination fee. It typically costs around 0.5 to 1.0% of the total mortgage. It covers the cost of receiving and reviewing the mortgage application covering the entire transaction time beginning with the initial pre approval to complete funding upon closing. The loan origination process typically includes a credit check which costs around $200 for every person on the application.
Fees Charged by Attorney
The state of Georgia requires every real estate transaction to have a licensed real estate attorney involved. The attorney will work with the mortgage broker. They will draft the purchase contract and also act as an escrow agent for processing of property deeds as well as a variety of other legal documents. The real estate attorney in such deals is essentially a representative of the lender. The regulations in Georgia are quite different in this regard. Most of the work done by an escrow or title company in other states is performed by an attorney in Georgia.
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As far as the fees are concerned, some attorneys like to charge by the hour. However, the fees could go up significantly if the transaction is sufficiently complicated. There are also attorneys that have a standard flat fee for all kinds of real estate transactions. There are others who have a sliding scale that goes up with the mortgage amount. Whatever be the cost, it is important to have an experienced and reliable real estate attorney by your side.
Transfer Tax
All the sellers in the state of Georgia have to pay a transfer tax when transferring the property to someone else. While this tax is required to be paid by the seller but practically, it is the buyer that ends up paying this cost. Calculation for this tax stands at $1 for every $1000 of property value.
Property Tax
Property taxes in Georgia are lower, on average, as compared to other states. The due date varies across the state but as a buyer, you are expected to pay a prorated first property tax payment.
Insurance Cost
Homebuyers in Georgia are expected to have homeowner’s insurance before receiving the mortgage money. There is the option of rolling over the insurance payment into the overall mortgage payment but you can also arrange for it separately. Proof of an active policy needs to be provided to the lender before funds are released. Some other specialized insurance policies might be needed for covering storm damage or flooding in other parts of the state.
Home Inspection and Property Appraisal
Needless to say, these are extremely important parts of a real estate transaction. These two tests are needed by every mortgage lender before they agree to fund the loan. A mortgage lender typically engages the services of a third-party home appraiser for determining the current market value of the home you’re planning to buy. This appraised market value should be within a particular range of the agreed-upon purchase price. If the appraised value is lower than what you are paying to the seller, expect funding delays or be ready to renegotiate with the seller.
At least one instance of home inspection will be carried out to get an idea of the current state of property. It is legally required for sellers to disclose any known problems. Home inspections provide an additional warranty that there are no major issues with the property. If primary home inspection discovers something significant, it may cause funding delays or renegotiations.
Private Mortgage Insurance
If a homebuyer is not willing to pay 20% of the mortgage amount as down payment, the lender may require them to pay an additional mortgage insurance premium or private mortgage insurance. It is commonly seen with various mortgage loan programs such as USDA loans, FHA loans, and VA loans. The PMI premium is required to be paid up front but mostly, the payment is added to the monthly mortgage payment until the monthly payment is within the monthly payout threshold.
These cover most of the standard closing costs every buyer can expect to pay when they buy a home in Georgia. If you have any questions regarding mortgage or are planning to move to the Atlanta area, get in touch with Moreira Team today. Our team of experts can help you get preapproval for the home loan and help you get an idea of the total closing costs associated with a home purchase.