May 31, 2008

Pasadena CA Real Estate: Recurring and Non-Recurring Closing Costs

Pasadena home buyers asking home sellers to pay for some of their closing costs need to be very careful at how the California Purchase Contract is written.

There are two types of closing costs. They are Recurring and Non-Recurring costs.

Recurring Closing Costs are charges or fees which will occur more than once. For example, home property taxes, fire insurance, mortgage insurance, HOA (Home Owner Association) dues.

Non-Recurring Closing Costs are charges or fees which only occur one time during the purchase of your Pasadena home. These charges include escrow fee, title insurance, recording fees, notary public fees, loan origination and discount point fees. In essence, anything that is a one-time fee and will not be paid again.

The reason that it is important to specify the types of closing costs a buyer is asking the home seller to pay is because as a buyer, you'd want to use the full amount of closing costs allocated to you by the seller.

For example, your offer is asking the Pasadena home seller to pay $5,000 of your closing costs. The costs are not described as recurring or non-recurring. Most lenders will allow the escrow company to credit you non-recurring closing costs only. If these non-recurring closing costs come up to only $4,000, you will not be able to apply the remaining $1,000 towards your Pasadena home purchase.

Make sure to work with your lender and Pasadena Real Estate agent to understand what kind of closing costs your mortgage lender will allow and the percentage of the sales price that can be applied towards these costs.

Don't be caught unawares. Be an informed home buyer!

READ MORE: How much can you expect to pay in closing costs and what are they?

If you are ready to start your Pasadena home search, please call me at 626-629-8439 or email me here.

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