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How much is it going to cost?

Published Oct. 9, 2005

You've found the house you want. You're ready to make an offer. What happens now?

If the real-estate agent hasn't already done so, he or she should hand you an agency disclosure sheet for you to sign, said Ben Friedlander, broker-owner of Big Ben Realty in St. Petersburg. The agent is required by law to make it absolutely clear whom he or she represents _ whether it's you, if you're dealing with a buyer's broker, or the seller.

No matter how friendly and helpful sales agents may be to you, the buyer, those who represent the seller have a legal responsibility to get the best deal for their clients. If you tell a seller's agent, "Well, I'm going to offer $98,000, but I could go as high as $105,000," that agent is legally obligated to report that information to the seller.

Another section of the sheet discloses whether the sales agent is being compensated by the seller. Again, this is to make it absolutely clear where the agent's financial loyalty lies.

This document also contains a standard radon-gas disclosure, alerting you to the possible existence of radon in some Florida homes and cautioning you that it may present health risks. It doesn't mean anyone has tested the property or that radon is present there.

The big question on your mind now is: If I buy this house, what's it going to cost me? Can I really afford this?

At this point your agent will fill out a "buyer's estimated closing expenses" sheet, also referred to in the trade as a "net sheet." This is a good-faith estimate of all the costs you're going to incur on the way to the closing table.

Let's assume you're planning to offer $125,000, and you're going to put down $25,000 and get a $100,000 new, conventional mortgage.

Here's what some of those mortgage closing costs are and what they might total. Not all costs will apply to every transaction, and costs will vary.

Origination fee. This is a fee the lender is paid for the service of processing and delivering the loan, explained Cheryll Leopold, assistant vice president at SouthTrust Bank. Figure 1 to 1{ percent of the loan amount. For this example that would be $1,000.

Discount points. An up-front finance charge. Each point equals 1 percent of the loan amount. Look at the mortgage table on Page 2-H of today's At Home section, and you'll see rates quoted as "7.88 percent and 2 (discount) points" or "7.50 percent and 0 points," for example.

Assumption fee. Charged if you assume someone else's loan, typically 1 percent, but may vary, or you may be charged a flat fee.

Appraisal. Your lender will order an appraisal of the house to make sure the property is of sufficient value. In this example, for an 80 percent loan, the lender would want to be sure the property was worth at least $125,000. You will pay for the appraisal. Typical fee is about $225-$250.

Survey. An examination of the actual parcel of land to determine whether there are any encroachments upon it. Did a neighbor build a garage on the property you want to buy? Did the sellers build their garage on the neighbor's property? Cost: $150-$200.

Title policy. an insurance policy protecting the lender's investment. (See the story on the closing, Page 5H, for more.) Cost: about $250.

Documentary stamps on the mortgage. A tax charged by the state for processing documents. Cost: $3.50 per $1,000; in this case, $350.

Intangibles tax. A tax on the mortgage note for the value it represents. Cost: $2 per $1,000; in this case, $50.

Recording. The cost of recording the documents at the county courthouse after the closing. Cost: $25.

Credit bureau. The cost of the credit report the lender will request on you. Cost: $50.

PMI or VA funding fee. PMI refers to private mortgage insurance, required if you're putting down less than 20 percent. Average first-year premium is 1 percent of the loan amount, Leopold said. The VA fee, about 1\ percent of the loan amount, goes to defray their various costs, she said.

Other. You may hear this referred to as "junk fees." They might include document preparation fees, courier charges, a research fee to make sure property taxes have been paid. Cost: $175-$400.

In addition, you'll be asked to prepay homeowner's insurance, flood insurance if you live in a flood zone, two to four months of real estate taxes and interest on the mortgage from the day of closing to the due date.

Unless you have been able to persuade the seller to pay for some of these items, you will be expected to pay for all of them.

The net sheet will also show your approximate monthly payment of principal and interest, taxes and insurance and the total "PITI" payment _ principal, interest, taxes and insurance.

You've looked over all the numbers and maybe gulped a few times. Can you handle these figures? If the answer is yes, it's time to fill out the contract and make your offer.

"Read the contract," Friedlander urged. "Have it explained to you. It's the title company's road map to the closing, a AAA Trip-Tik if it's written right."

There's nothing mysterious about it. It says how much you're offering for the property and how much money you're putting down. It sets a time limit for the sellers to accept or reject your offer. The contract is contingent upon your being able to obtain a mortgage at prevailing rates. It spells out when the closing will take place and who's responsible for various fees and charges.

You may want to add some provisions to the contract _ for example, that it is contingent upon a satisfactory report by a home inspector, the inspection to be performed within a specific period.

The real-estate agent will communicate the offer to the sellers. They can say no, they can counter offer, or _ what you hope most _ they can accept. You're on your way.