Count on Those Extra Costs

WHEN you buy a home, you will discover that the price is much bigger than what the seller is asking. Behind the down payment and the mortgage installments lurk nettlesome expenses known as closing costs. They can amount to 3% to 6% of the size of the mortgage. On a typical $80,000 mortgage, that means you will have to pay an additional $2,400 to $4,800.

Among the extras you have to fork over are points. A point equals 1% of the mortgage amount, and your lender is likely to demand one to three points at closing. That is meant to protect him in case he did not charge you enough interest to make a profit.

And buyers who cannot put down more than 5% to 10% of the purchase price in cash are required to buy private mortgage insurance to protect the tender against default. For this insurance, you will be charged a one time fee of 1 to 11/4 points plus annual premiums of a quarter points or more.

Mortgage lenders also want proof that the seller has a clear title to the property you are buying. That is why you will have to pay for the cost of a title search. You also will have to buy insurance to cover the possibility that the search missed something. Figure on the two fees running you a third to a half a point.

It is up to you to insure the house. At the closing you must show that you have a policy and that the first year's premium has been paid. That will come to between $350 and $750 for a single family house and slightly less for a condo.

Of course, many towns, counties and state governments also muscle in on the closing, demanding their due in the form of sales or transfer taxes. These are usually based on the selling price of the house or the size of the mortgage and can run a couple of points or more.

Just when you think you have paid every conceivable tithe, tariff and tax, a few more bills will crop up. If you need an attorney to represent you at the closing, for example, that will be $250 to more than $1,000. But you will know you have finally reached the end of the line when you have to pay to have your deed recorded. That usually will be only $40 to $60.