How much money should I plan to take to settlement?
It's difficult for anyone to say exactly how much money you will have to take to settlement, because some expenses are pro-rated right up to closing. Federally-required settlement-cost estimates help, but they are only best guesses. Its wise to be prepared for some unexpected closing costs. Some of the expenses typically paid at settlement are:
- Prepayments of related costs, such as a year of hazard insurance and several months advance on property taxes. Rather than closing fees, these are escrow items required by many lenders.
- Points and interest rate, which are the most variable expenses, and could change on the morning of settlement unless the buyer has a locked-in loan rate.
- Interest on the loan, property taxes, homeowner association dues, and other costs the homeowner normally prepays or pays on a set schedule. A change in settlement date can dramatically alter the amount due on these items.
- The cost of title insurance is another expense paid at closing. Often, purchasers are given the option to buy a piggyback policy that protects them, just as the mandatory policy protects the lender's claim in case of a dispute over title. The cost to the buyer is not usually listed on pre-settlement estimates, but is generally paid at closing.
Some of the items listed on settlement sheets may have already been paid, such as credit report fees, loan origination fees, survey of the property, etc.