The purchase of a home involves certain costs. Closing costs are typically paid by the buyer in accordance with the language of the sales contract. However, in some situations, certain closing costs are covered by the seller. Below, we answer the question of what closing costs are when buying a home.
Closing costs are fees paid to cover an array of services involved in a home’s sale. Such fees can be paid in a direct or indirect manner by hiking the amount of the loan or increasing the interest rate. Plenty of the buyer’s expenses are tied to obtaining the loan in the first place. If you are curious about the costs in your unique home loan, do not hesitate to ask our team for assistance. We will explain all the details of your mortgage costs so you can easily understand where all that money is going towards.
You will be provided with a Loan Estimate within three days of submitting your application for a home loan. The Loan Estimate explains information ranging from estimated interest rates to fees, payments, closing costs and so on. Simply getting an estimate is not an indication that you are approved for the home loan. However, obtaining an estimate is the key initial step toward obtaining the home loan. Our team is here to explain estimates to buyers in layman’s terms. If you have any questions or concerns about closing costs, simply reach out to our team and we will provide an explanation.
There are numerous closing costs in every residential real estate transaction. Closing costs related to the loan include appraisal costs, the cost of obtaining the mortgage-seeker’s credit report, the upfront interest payment, costs for the escrow account, and additional costs related to the loan itself. Loan-related costs include points, meaning the optional fee that can be paid to lower the mortgage interest rate.
There are also some costs related to property taxes that must be paid at the time of the home purchase. Property tax costs range from transfer taxes to recording fees and insurance. In terms of homeowner’s insurance costs, the title insurance, private mortgage insurance, and earthquake/flood insurance must also be paid.
Closing costs differ based on your location, the property in question, and the type of loan selected. Though all of the fees noted below might not be included in your real estate transaction, it will certainly include some of them. Some home-seekers are surprised to find there is an application fee to simply cover the cost required for the lender to process the application for a home loan. Be sure to ask the lender what this fee covers when submitting your application for the home loan. The application fee accounts for everything from a credit check that pulls the loan-seeker’s credit score to the appraisal of the property and beyond.
The origination fee covers the lending institution’s administrative costs. This fee is typically 1% of the entire loan yet it might be possible to obtain a mortgage without an origination fee. The escrow/closing fee is paid to the escrow company or lawyer for completing the closing. The escrow oversees the property’s closing process as an unbiased third-party.
If you still have some questions about closing costs when buying a home, who pays closing costs on a house, or anything else related to the purchase/sale of a home, contact us today. We enjoy helping people just like you achieve their home-ownership dreams. Let’s talk about finding you a house to make a home!