Here’s what you need to know about closing costs.
When buying a home, be prepared not only for the down payment for your dream house but for the closing costs as well. The closing costs include the miscellaneous fees charged by those involved with the home sale, including the bank, the bank’s insurance company, the Attorney, the appraiser, the title company and the local government. The closing costs may also vary greatly depending on where you live and the property you want to purchase.
What Goes Into the Total Closing Costs?
Typically, the closing costs (also known as Good Faith Estimate or GFE) include the fee for running your credit report, the fee lenders charge for processing the loan paperwork (loan origination fee), Attorney’s fees, appraisal fee, survey fee, pest inspection fee, and charges for any inspection required or requested by either you or the lender.
It may also include discount points (fees you need to pay in exchange for a lower interest rate), title insurance and title search fees, escrow deposit (to pay for a couple months’ property taxes and private mortgage insurance), recording fee (paid to a city or county for recording the deed) and underwriting fee (covers the cost of evaluation a mortgage loan application). As such, it is easy to see how the closing costs can amount to about 2% to 5% of the purchase price. According to a recent survey, home buyers pay about $3,700 in closing costs alone.
Is It Possible to Cut Your Closing Costs?
Yes, it is very much possible. Here’s how you can do it.
Negotiate with the seller. Try to negotiate the purchase price of the house since getting a couple of thousand dollars in discount may spell a huge difference in your closing costs. In addition, try to see if the seller would agree to pay all or a portion of the closing costs. While the home buyer is the one who is responsible for paying the closing fees, some sellers would agree to this condition if they really want to finalize the sale.????
Shop around for the lowest fees. Each lender charges different amounts for each of the items included in the closing cost so you should find a lender who offers the lowest fees and interest rates. You can also ask your lender representative if they can give you a better deal. Tip: Your lender should provide you with a Good Faith Estimate and Settlement Statement (HUD-1) after you qualify for a mortgage. Review these documents and compare them with the typical closing costs provided in authoritative websites.
Schedule late in the month. You can pay lower closing fees by setting your closing date toward the end of the month. Interest for the current month is charged at closing so you will only pay a fraction of the interest by doing so.