Here are a few points about closing costs associated with your new home?
As you begin navigating the home buying process you’re biggest job is to educate yourself about each of the different moving parts. Do you know all that you need to before you buy your first home? Did you remember to look into closing costs and what they entail? If not, here’s a short list of things you need to know before you get started.
What are Closing Costs?
If you don’t know what closing costs are, they are fees that your lender or service provider will charge to be paid with your down payment and interest or principal associated with your mortgage at the time the title is transferred to you. This cost is something that you should plan for when planning how you will finance your purchase, but keep in mind it can be difficult to calculate.
How much will it Cost?
One way to estimate how much money you will spend on closing costs is to expect that you will pay between 2 and 5 percent of what you are actually going to pay for the home. Once you’ve submitted your application for the home loan your lender is required by law to give you a good faith estimate of your closing costs within 3 days; this can actually change up to 10 percent by the time everything is said and done. Obtaining the good faith estimate will allow you to finance the costs into your loan or pay in cash with your down payment of the home.
What is Included in these Costs?
What’s included in your closing costs can vary widely and can even depend on the location of the home and your mortgagor. You can expect administrative fees, settlement fees, lender charges and escrow fees to all be included. Also title service fees, appraisals, title insurance, home inspections, attorney fees and any other costs that are associated with finalizing your sale can be lumped in with settlement fees and costs. You should also expect origination fees from your lender for the process of actually giving you the loan, as well as any fees that you will be paying in advance for items you will be paying as a homeowner such as property taxes, interest and homeowner’s insurance. Many of these payments will be placed in an escrow account that will provide you a reserve for emergencies or in case the deal falls through at the last minute.
While closing costs can vary and they can be minimized, they are very rarely avoidable; they will be paid in some form when you purchase a home. That’s why it’s important for you to know what to expect, use this list to start the conversation with your agent and your lender to make sure that you fully understand the process and how to prepare for them when figuring out how much you can expect to spend. If there is ever any part of the closing or home buying process don’t hesitate to ask your lender and your agent until you fully understand how things work.