A Home Buyer’s Guide to Closing Costs

 It is necessary to know all the costs linked with the purchase when you budget for a home. Some numbers are quite clear about the cost of the house, and the down payment you would require, but have you ever thought of closing costs? These costs are often suspense to home buyers unless the end when they sit at the closing table to sign the contract. And also, closing costs could be an important expense for home buyers that, in the middle of anything else, could simply be overlooked.

Before you make one of the huge purchases of your entire life, it is better to have control over what you would be expecting to disburse come closing time. That is why we have mentioned and explained everything in this blog post related to closing costs. Let’s not waste more time and jump into it. 

CLOSING COSTS: ‍ 

Other than the mortgage and down payment costs, there are a lot of other fees linked with the purchase of a house. All of these costs make up for your closing costs, which come due when you close on the loan. Closing costs cover a vast range of costs including the cost of an evaluator, house checking costs, loan-related costs, and a lot more. Do not worry, we would provide you a quick runway of the most common costs included in your closing costs. 

WHO PAYS FOR CLOSING COSTS? ‍ 

When we consider closing costs, we think of purchasers, but in reality, both the purchaser and the seller are liable for paying these costs. Costs for the seller generally include the commission of real estate and title transfer costs. Purchasers, on the contrary, generally pay the mortgages costs, evaluation costs, and checking costs. Though these costs are negotiable and in a few cases a seller would agree to pay for a portion of these expenditures.

HOW MUCH FOR CLOSING COSTS? ‍ ‍ 

On average, house buyers could expect to pay between two and five percent of the loan amount in their closing costs. Lenders are needed to give borrowers with loan estimation within 3 days of applying for a mortgage, (according to the law). This estimation lays out the estimated closing costs, expected interest, and monthly payment. However these costs are subject to change, what is presented must be extremely close to the final charges you would see at closing costs.

WHERE COULD YOU FIND YOUR CLOSING COSTS? ‍

At least 3 days before closing, you must get a closing disclosure that outlines all the costs and words linked with your home purchase and loan. The closing disclosure would involve the total quantity in closing costs due, also a detailed breakdown of all the costs that make up that sum. These costs are subject to change but they must not differ essentially from what is shown on the disclosure. 

WHEN ARE THESE CLOSING COSTS DUE? ‍ 

Closing costs are due at closing when the loan credentials are being signed and you officially become a house owner. Closing costs are paid either by wiring the expenses to an escrow account or by the check from the cashiers. 

IS CLOSING COSTS NEGOTIABLE?

Few closing costs could be negotiated including recording fees, attorney costs, and messenger costs. It is as well possible that the seller might chip in to wrap some of the closing costs of the buyer to seal the deal. But in the cutthroat world of the real estate market, this might not be the same.‍

Now let us discuss the most common fees included in a house buyer’s closing costs. 

COSTS RELATED TO PROPERTY: ‍

1. House inspection cost – 300 to 500 dollars

2. Property appraisal cost – 300 to 400 dollars

3. Escrow cost - Depends‍ 

4. Flood certification – 15 to 20 dollars

5. Recording cost – varies 

6. Survey cost – 300 to 450 dollars

7. Property taxes – varies

8. Transfer taxes – varies

9. Annual HOA assessment – varies

COSTS RELATED TO LOAN:

1. Loan application cost – 200 to 400 dollars

2. Loan origination cost – 0.5 to 1 percent of your loan amount 

3. Assumption cost – one percent of the loan balance

4. Attorney cost – varies based on per hour rates

5. Prepaid interest – varies based on loan amount

6. Discount points – one point equals one percent of the loan

COSTS RELATED TO INSURANCE:

1. Mortgage insurance application cost – varies by lender

2. Upfront mortgage insurance – 0.55 to 2.25 percent of your mortgage insurance purchase cost

3. FHA, VA, OR USDA loan cost – FHA: 1.75 percent of your loan per month, VA: 1.25 to 3.3.  Percent of your loan, reliant on your down payment, USDA: 1 percent of your loan

4. House owner insurance – varies 

COSTS RELATED TITLE:

1. Title search cost – 75 to 200 dollars

2. Lender title insurance – varies 

3. Owner title insurance – 0.5 to 1 percent of the buying cost