Buyers Guide to Closing Costs in Brooklyn...

     If you are thinking of buying a home in Brooklyn the first step you must take would be to get your self pre-qualified for a mortgage.

     During the pre-qualification process, the Mortgage banker or broker will need know the income you reported to the IRS on your last two tax returns, view your credit report, debt and lastly the assets you have available for the purchase. With regard to the assets, you must bear in mind that aside from your down payment, there are other closing costs you will incur. Usually these closing costs can amount to 5-6% of the mortgage amount. Therefore, if you were to purchase a home for $500,000 and put 10% down, you would need to have about $77,000.00 in liquid assets to structure the deal. If you do not have the extra money for closing costs you can borrow them using what is commonly referred to as a seller’s concession. Just bear in mind that you will be borrowing more money so your mortgage payment will be higher. This is a good option for a buyer who has little money, just enough for the down payment.

     It is more cost effective for a buyer to simply pay their own closing costs because the majority of said closing costs are based on the actual mortgage amount. Many times buyers ask me "how much will my closing costs be?" When I tell them about 5-6%, they then follow up with the proverbial "Well, what are those closing costs?"

So here is a simple breakdown of the closing costs buyers in Brooklyn typically incur (based on a $500,00 purchase price with 10% down payment):

• Mortgage Tax: Here in Brooklyn (NYC) the mortgage tax a consumer pays equals 1.75% of the mortgage amount.
• Mortgage Broker Fee: Many times this is 1% but could be more based on buyers qualifications.
• Appraisal Fee: Usually $450.00 for a one family house in Brooklyn.
• Underwriting/Processing Fee: This helps to offsets the banks costs. Hint...try to negotiate this fee!
• Abstract to Title Search: This search makes sure the property is legal and shows what liens are attached to the property and/or if any violations exist on the property.
• Title Insurance: This is necessary to insure the validity of your title, in this case it would be about $600.00.
• Bank Attorney Fee: $750.00, the bank has to have an attorney to represent them at the closing and you the buyer has to pay for it!
• Your Attorney: You also have to hire you own attorney. Your lawyer will usually charge anywhere from $500.00 to $5,000. The average would be about $1500.00.
• Survey: $400.00, this measures the lot and house dimensions to help define what it is exactly that you are buying.
• Prepaid Interest: Depending on the day of the month you close this can be up to $2300.00. (Savvy buyers make sure they close at the end of the month and this will be less! It is a “per day” expense starting from the first of the month.)
• Recording Fee: $520.00, this is to record your ownership of the property to public records.
• Reserves held by lender for Hazard insurance and real estate taxes: For a home selling in this price range in Brooklyn, this would be about $1,000.00.
• Then you have several other nominal processing fees that could range from 0 to $500.00.

     As you can see, the expenses listed above add up to about 5% of the loan amount. These expenses can be higher depending on your qualifications and type of loan program you apply for.

If you have any questions regarding this blog entry or mortgages in general, please submit a comment or question to this blog. Thanks for reading!

Mitchell Feldman/Madison Estates & Properties, Inc.
Office: (718) 645-1665/ Cell: (917) 805-0783
Email: MitchellSFeldman@aol.com 
Web Site: www.MitchellFeldman.com and www.MadisonEstates.com