The bundle of fees associated with the buying or selling of a home are called closing costs. Certain fees are automatically assigned to either the buyer or the seller; other costs are either negotiable or dictated by local custom.
Buyer Closing Costs In Hawaii
When a buyer applies for a loan, lenders are required to provide them with a good-faith estimate of their closing costs. The fees vary according to several factors, including the type of loan they applied for and the terms of the purchase agreement. Likewise, some of the closing costs, especially those associated with the loan application, are actually paid in advance. Some typical buyer closing costs include:
- The balance of the down payment (total down payment required minus the earnest money deposit)
- Loan fees (points, application fee, origination fee, credit report, if not paid in advance)
- Prepaid interest
- Inspection fees (if not previously paid)
- Appraisal (if not previously paid)
- Mortgage insurance (if required, typically 1 years premium plus an escrow of 2 months)
- Property Hazard insurance (typically 1 years premium plus an escrow of 2 months)
- Title insurance, as required by lender or if desired, by cash buyer (50%, Seller pays 50%)
- Escrow fee (40%, Seller pays 60%)
- Documentary stamps on the note
If a Buyer has a VA loan certain types of fees may not be paid by the Buyer and are covered as part of the lenders fees. Please consult with your lender for specifics or see the following site for details.
Seller Closing Costs in Hawaii
The main closing cost for a Seller is usually the mortgage loan payoff amount, if there is a mortgage on the property. There are also other costs which may include:
- Mortgage liens, second mortgages/lines of credit & fees
- Other liens, e.g., mechanics lien, tax lien, etc.
- Seller’s Broker’s commission (includes portion paid by Seller’s broker to Buyer’s broker)
- Closing costs of Buyer (only if agreed to in the Purchase Contract, including sometimes, points on Buyers loan)
- Termite inspection fees (if not previously paid)
- Survey fee (if not previously paid)
- Documentary Stamps on the Deed
- Title insurance (50%, Buyer pays 50%)
- Escrow fee (60%, Buyer pays 40%)
- Property taxes (unpaid and prorated)
- Statutory conveyance taxes
Estimate Your Closing Costs (courtesy of Title Guaranty Hawaii)
Negotiating Closing Costs
In addition to the sales price, buyers and sellers frequently include closing costs in their negotiations. This can be for pretty much any fee involved. For example, a buyer can request a seller to pay a point on their mortgage and buy down their interest rate (SELLER BUY-DOWN). This often makes great sense because the Buyer can pay a bit more in the purchase price, rolling it into the mortgage, but get a credit back from the seller to use toward the point, saving much more in interest in the long run.
Likewise, a buyer may want to save on other up-front expenditures, and so agree to pay the seller’s full asking price in return for the seller paying all the allowable closing costs.* There’s no right or wrong way to negotiate closing costs; just be sure all the terms are written down on the purchase agreement.
At the closing, certain costs are often prorated (or distributed) between buyer and seller. The most common prorations are for property taxes. This is because property taxes are typically paid at the end of the year for which they were assessed.
Thus, if a house is sold in June, the sellers will have lived in the house for half the year, but the bill for the taxes won’t come due until the following year! To make this situation more equitable, the taxes are prorated. In this example, the sellers will credit the buyers for half the taxes at closing.
*This varies with the type of loan.