Generally, a purchaser’s closing costs fall into two categories: loan costs (money owed to the lender for services) and other costs (costs you owe to the co-op, condo, or seller). While not every purchase will require a buyer to cover all the closing costs outlined in this article (and actual fees vary widely), buyers are generally expected to cover most of the closing costs described in the following sections. Notably, if you’re buying a condo also be prepared for additional closing costs, including both city and state mortgage recording taxes.
In this article:
Loan Costs (Coops and Condos)
Origination Charges
Depending on the lender and whether you opt to purchase points, expect at least some origination charges, including the following:
• Application Fee – $175
Many lenders charge an application fee, which is usually $150 to $200
• Commitment Fee – $1000 (cost can be fixed or a percentage of the undisbursed loan and will be higher for larger loans). This is a fee (either flat rate or a fixed percentage) that lenders charge as compensation for guaranteeing a loan at some point in the future.
• Points – Variable costs If you’re a first-time buyer, origination points may be a new concept. At their most basic, origination points are a fee paid to cover the evaluation, processing, and approval of a home loan. The more points paid, the lower the interest rate on your mortgage. Typically, one point is equivalent to 1 percent of the mortgage.
Other Lending Costs Typically Charged by the Lender to Buyer
In addition to origination fees, buyers will typically be expected to cover the following costs and most lenders will automatically charge these costs (i.e., buyers won’t be able to shop around for other options):
• Appraisal – $585
This cost covers the appraisal of the unit carried out by the lender to ensure the unit has not been over- or under-valued.
• Credit Report Lender - $24
Generally, lenders pull reports for buyers from all three major credit bureaus and this comes at a cost.
• Lender Flood Certification – $5
This small cost is simply a way for the lender to confirm that the property is not in a known flood zone; if the property is in a flood zone, the lender may still proceed with the mortgage but will require the purchaser to take out additional flood insurance.
• Title - Settlement / Closing - $1,100
This fee covers the cost of another service provided by the lender—a thorough search to ensure that the property isn’t currently in arrears of its property taxes and that any existing loans or liens on the property have been paid in full. Simply put, this fee ensures a buyer is about to inherit someone else’s financial mess.
Other Services
Beyond the aforementioned fees, in New York City, anyone purchasing a coop or condo should be prepared to cover a host of other services for which buyers may or may be able to shop around. These fees include:
•
Bankruptcy Search –$70
This search ensures that you have not declared bankruptcy since applying for your loan (earlier declarations will appear on your credit report—this is a second check).
• Co-op Lien Search – $380
Generally, the purchaser’s attorney does a lien search of any UCC filings, judgments and liens against the cooperative corporation or sponsor.
• Escrow Service Fee – $75
Once a contract closes, one puts their “earnest money” or down payment into an escrow while the deal moves toward a close. The escrow agent charges a fee (flat or fixed percentage of the sales price) to hold the money during this time.
• Municipal Search – $200-$400
This service, generally carried out by the buyer’s attorney, is essentially a review the title search for the property being purchased.
• Patriot Act Search – $70
The Patriot Act Search is another cost that may come as a surprise, but since 2001, anyone buying a property in the United States is subject to a search to ensure they are who they say they are and have no history of involvement in terrorist activities.
• Recording Service Fee – $30
After closing, both your mortgage and property transaction will need to be recorded in the county where the closing too place. Locally, this fee is generally no more than $30.
• State Tax Search – $125
This additional search is designed to uncover any tax notices related to the property at the state level.
Other Costs (Coops and Condos)
Taxes and Other Government Fees – Variable and mostly paid by seller
There are two types of taxes that trade hands at closing: recording fees and transfer taxes. Recording fees are generally a minor cost (and covered by the buyer). Transfer taxes, on the other hand, can be significant—fortunately, in New York City, transfer taxes almost always fall on the seller, not buyer. Still, while negotiating your contract be certain to ensure this is the case.
Prepaids - Variable
“Prepaids” refer to any costs that you’ll need to pay before taking possession of your new property. This can include homeowner's insurance, mortgage insurance (if you’ll have it), prepaid interest on your loan, and prepaid property taxes. In New York City, prepaids can add up quickly, especially once you add taxes.Initial Escrow Payment at Closing – Variable
In many New York City coops and condos, boards ask for anywhere from six months to five years of fees in an Escrow (read more here). If they are due, this additional payment will also be due at the closing.Coop or Condo Approval Fee - $500 on average
Most coops and condos charge an application fee (generally about $500). Some coops and condos also charge a move in fee but the latter is usually reimbursed—assuming you or your movers don’t damage the building during the move in.Additional Condo Closing Costs
Mortgage recording tax – Variable (percent of purchase price)
Mortgage recording taxes are generally the largest costs that condo owners face at closing. This tax, which is applied at the city and state level, essentially taxes buyers on any money they borrow to purchase a home. At the city level, the mortgage recording tax is 1.8 percent on mortgage amounts under $500,000 and 1.925 percent on mortgage amounts above $500,000. New York State has its own 0.5 percent tax. So, how high can your mortgage recording tax be? If you put 20% down on a $2,000,000 condo, you can expect to pay over $30,000 in mortgage recording taxes at closing. For more details, visit the New York City mortgage recording tax site and New York State mortgage recording tax site.Title insurance - $500 to $3,500
Title insurance protects buyers if there is something amiss with the title of their property. While rare, title conflicts do arise. Let’s say someone left a condo to a distant relative in their will but the relative never claimed title to the property and it was subsequently sold. Title insurance is designed to protect buyers from such disputes and from any other problems (e.g., liens or defects) that arose before you made your purchase.Assistance With Closing Cost
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