How Do You Calculate the Buyer's Closing Costs in an Escrow?

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In escrow, a buyer's closing cost considerations are a calculation of fees due to loan points, title insurance, prepaid interest and account fees. A real estate agent can provide the buyer relevant tax information and can present information to a home owner's insurance company to determine title insurance fees.

Escrow costs are determined by each lender or institution and are not regulated by any state or governing body. The potential homeowner must first research each lender's fees, including fees for each application, loan origination fees, document preparation costs, tax servicing and other costs associated with opening a new account. Some lenders waive certain fees or have a comprehensive package to offer a potential buyer. Getting an estimate of these fees beforehand helps buyers choose the right lender and ensure there are minimal surprise costs later.

Lenders are required by The Real Estate Settlement Procedures Act to provide an accurate estimate of possible closing costs within three business days of an application for a loan. Compare this estimate against actual costs with the chosen lender and discuss the differences. The Real Estate Settlement Procedures Act also regulates what a lender can require a home owner to hold in escrow, so knowing those guidelines beforehand helps a buyer negotiate terms.