There isn’t a day that passes New Orleans real estate agents by that a client doesn’t ask “What exactly are closing costs?” People ask this because they are so expensive! Where is this money going?!
Here are your answers:
#1. Insurance
A portion of your closing costs goes towards your different insurances. You are paying for homeowner’s insurance (and flood insurance if your mortgage requires it) for an entire year plus some.
When your insurance bill comes around for your New Orleans home, your escrow account will pay the bill for you. Since insurance companies increase premiums every year, the mortgage company always factors in a little extra for these price hikes.
#2. Taxes
Property taxes are collected at different times in this state. Orleans parish pays property taxes at the beginning of the year and every other parish collects at the end of the year.
If you are buying a house in Orleans parish (all New Orleans homes are in Orleans parish), you will have to reimburse the seller for the amount of time they are not living in the property. While you will not actually write a check at closing, this is a part of your closing costs. Your escrow account will factor how much you owe the seller plus how much you will have to pay in January.
Buying in other parishes means the seller will “pay” you at closing for the days they lived in the property. However, your escrow account still has to account for the next year’s taxes. They like having more money in the account and writing you a check than not having enough to pay the taxes.
#3. Title Insurance
YES – you need title insurance. It protects you if someone tries to say they have claims to your house later on. (Surprise! Sometimes title work wasn’t done properly before you bought the house!) When buying a home in New Orleans, or the metro area, title insurance is something we tell clients is a must-have.
Title insurance varies by the sales price of your house and it’s a one time fee.
Your mortgage lender will require their own lender’s policy that you pay for.
#4. Lender fees
Your local mortgage lender has required fees – credit report, underwriting, lender’s title policy, and others associated with your loan. They typically require endorsements that have extra costs.
#5. Title Company Fees
The New Orleans title company that is handling your closing, they have fees associated with your home closing. There are charges for pulling the title history (it’s called the title abstract), the title examination of it the history (making sure you have a clear title), title insurance, document preparation, notary, wiring fees, and recording fees. Recording fees are dictated by the city.
However, if they charge you too much – they will send you a refund check. (Or, most title companies do!)
If you need recommendations for insurance companies, title companies, and lenders – we’ve got you. Text us now!