Based on the month you close, property taxes will be prorated between you and the seller. You may also be required to pay a full year’s hazard insurance (or homeowner’s insurance) premium in advance. In addition, you may also be required to place funds into a special reserve account (impound account) for taxes and insurance, which is held by the lender. You absolutely must have this to obtain a mortgage.
The “dwelling coverage” portion of your hazard insurance covers costs to completely rebuild your home, while the “liability coverage” protects you against accidents that occur on your property. “Personal Property Coverage” pays to replace your possessions and generally totals 50 to 75 percent of the dwelling coverage amount. Flood and earthquake insurance policies also are available and are recommended if you are in high-risk areas.
The Good Faith Estimate of loan closing costs are made pursuant to the requirements of the Real Estate Settlement Procedures Act (RESPA). These are estimated settlement costs which the buyer will be responsible for in conjunction with the settlement of the mortgage loan. There are two general categories of closing costs, non-recurring and recurring. Non-recurring closing costs are items that are paid once, while recurring costs are items paid repeatedly over the life of the loan.
This is a detailed summary of costs you may have to pay when you buy or refinance your home. They are listed in the order in which they should appear on a Good Faith Estimate you obtain from your mortgage lender. Elements of the Good Faith Estimate are: (Costs will apply differently to each homebuyer and are not particular in total to all homebuyers).