Video:What Does it Cost to Close Escrow?

Transcript:What Does it Cost to Close Escrow?

Hi I'm Nick Jaynes for About.com and this is what does it cost to close escrow? I'll be using information from the About.com Home Buying Guidesite.

What Is Escrow?

One of the most expensive parts about buying a home is the closing cost. It is the fee a lender charges to make a loan that will typically cost the buyer the most. The closing cost is usually between 2 and 4 percent of the purchase price. For example, to purchase a $300,000 home, it could cost you anywhere from $3,000-15,000.

A transaction is in "escrow" when both sellers and buyers have signed the purchase offer, and the earnest money deposit has been put into a trust account. For example, the Johnsons pay Wells Fargo $800 a month, which includes $200 for taxes and insurance.

Two Types of Fees to Pay When You Close Escrow

There are two types of fees you will pay when closing on a house: non-recurring and recurring. Non-Recurring are the closing costs, and they are fees you will only pay once. They include notary, wire, and attorney fees, home protection plans and a home inspection. Recurring costs include fire and flood insurance, property taxes, and mortgage insurance premiums.

Buy Insurance When You Close Escrow

Title policies are also included in the non-recurring costs, and they are a very important part of the closing. Just like car and life insurance, you want to purchase insurance on the title of your home. The top three choices are owners, lenders, and extended. They each cover separate elements regarding the title to protect against forgery, and other defects. The extended coverage covers the structure of the home and any building permit violations.

Tips for Crediting the Buyer When Closing Escrow

Most sellers are also interested to know if they can credit the buyer for closing costs. You always want to check with your lender before you get involved with a seller credit because your lender might not allow it. There are three main points to know. If you finance 100 percent of the purchase price, your credit might be limited to 3 percent of the price.

Your FICO score will also play a big part in your down payment. Depending on what it is, the lender might allow a seller to credit you as much as 6 percent of the price of the home. Lastly, lenders will not let a borrower receive cash from a seller at a closing. Having an experienced agent to help you with process is also recommended.

Hopefully this video will help you when you close on a home. Thanks for watching. If you'd like to learn more, please visit us on the web at About.com.