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What are Closing Costs?

You’ve shopped mindfully, keeping in line with your budget, and now, you’ve found your future home! Next, you’ll assess and budget for another expense- your closing costs in Minnesota. MN closing costs can sound a bit intimidating, as it’s a vague combination of fees due at closing. However, with a thorough breakdown and the guidance of a great agent (we recommend our experts here at The Antonov Group!), you’ll be prepared to walk into the closing room knowing the fees and services you’re paying for closing costs in Minnesota (and remember, not every buyer has to cover all of these fees). Here’s what we recommend keeping in mind when it comes to financing, title, inspection and document fees included in MN closing costs:

Application Fees

Loan Application Fee– May not be required by all lenders. Cost: ~$300-$500

Mortgage Insurance Application Fee– Required when down payment is <20% of the home’s purchase price. This insurance (aka PMI, or private mortgage insurance) protects lenders in the event of loan default Cost: varies (lender will disclose upon signing of purchase agreement)

Service Provider Fees

Loan Origination Fee– (not always included w/ mortgage shop around!). Pays administrative costs for using lender. Seller will sometimes pay. Cost: ~1% of loan amount

Title Search Fee– Closing or title insurance company ensures that property carries no tax liens or unpaid mortgages. Attorney may be required. Title insurance company usually used. Common closing cost in MN. Cost: $200-$400

Document Preparation Fee– Considered a ‘junk fee’. Like some closing costs in Minnesota, this is very often negotiable, and your agent should fight to waive this fee well before closing. If still required expect to pay, buyer sometimes pays. Cost: ~$200

Attorney Fees– Lenders, title companies, or both may require an attorney, which varies by state. Cost: ~$400 for lender attorney; ~500-$1500 for title company attorney

Insurance Fees

Mortgage Insurance Premium Fee– May be required by lender, includes mortgage insurance premium up front for first year (sometimes lump sum at closing which covers life of loan insurance premium payment) Cost- varies

Hazard Insurance Premium Fee– Covers 1 year’s premiums, and protects your lender from disasters affecting your home

Title Insurance Fees– Protects investment by ensuring that home title is completely clear. Sometimes accompanied by 2nd fee intended to coverlender. Cost: Ranges from .5%-1% of purchase price

Prepayment Fees

Loan Discount Fee-Varies from lender to lender. Sometimes called ‘discount points’. Fee paid upfront, intended to lower interest rate. 1pt=1% of loan, however, this does not mean that for every percentage point, your interest rate will also drop 1%. Cost: starting ~1%, varies

Prepaid Interest Fees– Required by most lenders, generally a payment on interest accrued between time of closing and your 1st mortgage payment. Cost: varies based on purchase price of home & interest rate

Reserved Account Funds Fee– prorated amount which includes property tax payment, homeowners insurance, assessments and sometimes mortgage insurance. Usually included in monthly mortgage payments. Lender sometimes requires 2 months’ worth of these fees at closing to verify that enough money is in the reserve fund to cover future bills. Cost: varies, usually 2 months’ payments

Inspection Fees

Lead Based Paint Inspection Fee– Not always required. When needed, this pays for evaluation of lead based paint risk. Cost: varies

Appraisal Fee– Required by lenders. You pay to bank, who then in turn use fee to contract independent appraiser. Appraisal determines value of home, and indicates whether or not it’s in line with amount listed on purchase agreement (for a list of real estate terminology, check out this article. Fee can be calculated based on size and area in which home is located. Cost; ~$300

Survey Fee– Service that will establish and confirm property lines. Sometimes required by your lender. Cost: ~$1000

Document Fees

Recording Fees– Government charge, records your sale in the government public record. Cost: ~$100

Transfer Taxes Fee– Collected by government (depends on jurisdiction), amount varies from minor to significant. Cost: varies

Credit Report Fee– not always required (may be free through government funded sites). If required, buyer pays. Cost: ~$25

Courier Fee– If courier used to pick up/deliver your documents, may be charged. Cost:varies by distance and notice

For more information on MN closing costs and closings in general, contact the agents at The Antonov Group today!

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