When purchasing a home, there are closing costs you have to understand and factor in to your budget before you hit the closing table. Here’s what you need to know.
What are closing costs?
Closing fees for services required to finalize your mortgage. Typically, the buyer is responsible for paying these costs unless otherwise negotiated to have the seller contribute. Fees include: (but certainly are not limited to)
- Attorney
- Appraisal
- Inspection
- Government taxes
- Title insurance
- Home Insurance
- Mortgage insurance
- Property taxes
How much are closing costs?
According to Bank of America, closing fees usually total about 3 to 6 percent of the home’s purchase price, and they generally vary depending on the property purchased and state you reside in. Your lender will provide you with an estimate of your closing fees following your loan approval, and although that number can change slightly, your final costs should be similar.
How can you reduce closing costs?
Some of the fees can be reduced by doing ample research on lenders at the beginning of the home buying process. Then, compare any potential discounts or deals they offer before making your choice. Additionally, you can attempt to negotiate with the seller to cover part or all of your fees towards closing. This is known as a seller contribution or seller concession.
Can you avoid upfront closing costs?
If you think you will be unable to afford the closing fees upfront, you can opt to roll them into your loan. However, choosing this route often costs you more in the long run. At a minimum, you’ll have to pay interest on your closing fees, or depending on your lender, you may face a higher interest rate on your entire loan.
Leave a Reply