Foley, Alabama is a wonderful place to live thanks to its welcoming locals, relatively low crime rate, and a plethora of available employment opportunities. This community is expanding rapidly, and the local government is successfully adapting to the new demands.
The region is a great place to retire or use as a second home because of the variety of housing options available, from beachfront condos to homes on golf course communities!
The real estate market in Foley, Alabama County is distinct from Gulf Shores and Orange Beach. Here, single-family homes make up the vast majority of the real estate market, in contrast to the condominiums that dominate beachfront locations.
However, before you can finally acquire the key to your new home, there are still fees that should be cleared. These expenses are collectively known as “closing costs.” Closing costs can be challenging to understand whether you’re a first-time buyer, an experienced investor, or a refinancing homeowner.
To help you understand these costs better, here is a detailed guide about all the things you need to know and be aware of about closing costs in Foley, Alabama from a buyer’s perspective.
Foley, Alabama Closing Costs
The charges incurred at the closing phase of a home loan transaction are what we call closing costs. Loan origination fees fall under lender costs, whereas appraisal fees, survey fees, title insurance premiums, and tax payments fall under third-party costs. Other costs incurred from outside parties exist as well. Let’s break it down into pieces.
While the loan origination fee and prepayment of taxes and insurance will account for the vast majority of your costs as a buyer, the following are some other potential charges you may see on your final billing:
This could be a one-time fee that covers items such as a credit check or the valuation of your new house. Inquire with your lender whether they charge this fee or not and what it covers. Sometimes, the seller will cover the appraisal cost as part of the agreed-upon closing fees.
A mortgage lender will require this of you, and you won’t be able to get one without it. If you can’t negotiate to have the seller cover your closing fees as part of the sale, you should prepare to spend several hundred dollars on this.
Real estate closings can be handled by either a real estate attorney or a title firm, depending on the laws in your state. They’ll likely expect compensation for their efforts on your behalf while purchasing your property.
This fee will cover the cost of transferring funds and papers to expedite your business transaction.
Credit Report Fee
This is a necessary step in the financing process. The interest rate you can get is heavily dependent on the results of a comprehensive, three-bureau credit report that will be obtained.
Escrow Deposit for Taxes and Insurance
“Prepaid costs” is the term used for this type of expense. You should expect to pay up to six months’ worth of home insurance and real estate taxes in advance.
FHA Initial Mortgage Insurance Premium
This is applicable only if you get a loan insured by the Federal Housing Administration. You can pay the 1.75% origination charge at closing or add it to your loan balance.
Not all properties need this, but if yours is located in a high-risk flood area, you’ll have to pay for several months’ worth of flood insurance before closing.
If you’re buying a house in a condo or HOA, the previous owner may have already paid the monthly dues for the remainder of the year. The seller may request a refund for the time they won’t use the property. Your realtor should have laid out the monthly dues for your new neighborhood by now.
Like taxes and flood insurance, homeowner’s insurance must be paid in advance. You should budget to spend several months’ worth of homeowner’s insurance premiums at closing.
Lender's Title Insurance
The lender requires a nominal fee to cover their losses in the event of a title defect discovered after closing.
Loan Discount Points
A loan discount point is equal to one percent. The interest rate on a loan can be “brought down” by paying a point at closing, which you and your lender can negotiate.
Owner's Title Insurance
As with lender’s title insurance, this provides you with peace of mind in case there are title problems after closing, but it is entirely discretionary.
This is a type of levy assessed by your mortgage lender. The standard commission rate is 1% of gross revenue.
Whether the buyer or the seller foots the bill for this depends on the specifics of the sales contract.
Lenders typically require you to pay the interest that will accrue on your mortgage from the closing date until the first payment is due.
Private Mortgage Insurance
An appraisal for your house that comes in at less than 20% of the loan amount will likely result in mortgage insurance being required by your lender.
Usually, 2 to 3 months’ worth of property taxes must be paid in advance at the time of closing.
After closing, the title agent takes the deed, mortgage, and other related documents to the courthouse to have these officially recorded.
This is an essential cost since it ensures that no one else has a lien on your property, and it is the title company’s responsibility to verify this.
Taxes must be paid when the ownership of a piece of property changes hands from one party to another.
VA Funding Fee
To qualify for a VA loan, you will need to pay a closing fee unless you are eligible for a waiver or want to have the cost financed.
Ways to Reduce or Eliminate Closing Costs in a Real Estate Transaction
Closing expenses can add up to a significant portion of the purchase price of a property, and many prospective purchasers have wondered whether there was any way to avoid paying them.
Like in other states, Alabama closing costs cannot be eliminated entirely. However, there is room for negotiation regarding reducing or reallocating some of these fees. Here are some innovative ways to minimize those unwanted closing costs:
Try to Secure a Mortgage With No Closing Costs
Talking to your lender is the initial step toward having your closing costs covered. Buyers can sometimes haggle for a no-closing-cost mortgage.
Remember, though, that you’ll need to pay for those closing charges somehow. With a no-closing-cost mortgage, the lender may increase your interest rate or add closing expenses to your mortgage.
Try to Come to an Agreement With the Seller
Buyers can bargain with sellers to have them cover some or all of the closing fees. Since these costs are deductible business expenses, many lenders may let sellers take them on as credits to seal the deal.
Get the Best Deal
Feel free to look around for the best financing terms and service providers.
Discuss Upfront Fees With the Lender
Ask your lender if they can waive, reduce, or credit you some of the fees associated with the closing process.
Set the Closing Date Towards the End of the Month
After the closing of a house, the buyer is contractually obligated to make mortgage payments. Even if the loan is closed in the middle of the month, the buyer will generally begin making payments on the mortgage on the first of the coming month.
Daily interest is charged from closing until the first mortgage payment date. A buyer can save on per-day interest charges by completing a house purchase as near the end of the month as possible.
Look for Army or Union Discounts
See if the military or your union offers any discounts. Discounts or rebates on closing costs are one type of financial aid available to members of the armed forces and labor unions who are buying a home. Before applying for mortgages, you should consider your eligibility for several programs.
Apply for a Loan Through the FHA
Low- and middle-income homeowners can get loans guaranteed by the Federal Housing Administration (FHA). The down payment and interest rate for FHA loans are often lower than those on conventional mortgages.
Buyers can spread out the payment of closing costs and origination fees over the loan term by including them in the total amount borrowed. FHA financing allows you to save on your home purchase’s closing expenses.
Closing charges will always be associated with buying or selling a home in Alabama. How much you’ll pay depends on the specific location in the state. You can save money on Alabama closing costs or your mortgage by shopping around and comparing rates and fees from multiple reputable lenders.
For detailed and in-depth assistance regarding Alabama Closing Costs, please feel free to contact me at 251-543-6094. You can also follow me on my social media accounts below to receive the latest news about Foley, Alabama:
Frequently Asked Questions
What are the mandatory closing costs in Foley, Alabama?
This includes loan origination fees, credit report fees, taxes and recording fees, attorney fees, and title searches.
What are the most common closing costs in Foley, Alabama?
The usual closing costs include escrow fees, lender’s title insurance, origination fee, pest inspection, and private mortgage insurance.
Who typically pays closing costs in a real estate transaction?
During a real estate transaction, the buyer and the seller are typically responsible for paying specific closing fees. How much each party should bear in closing costs is negotiable and subject to several factors.
How can I save money on my closing costs?
The amount you can save is negotiable and will depend on the terms you and the seller or lender agree upon.