As you put the effort into saving for your down payment, you may also want to budget for closing costs. These are the fees outside of the price of the property that you will need to pay at closing.
Closing costs may, on average, account for up to 5% of what the loan costs. It’s important to understand what is included in the closing costs and who will pay for what.
Most of the closing costs fall on the buyer. Others, such as the commission owed to the real estate agent, are the responsibility of the seller.
With seller concessions, the two parties can divide the closing costs. Seller concessions are fairly common in a buyer’s market as sellers will offer such an arrangement in a bid to make their deal more attractive to buyers. At the end of the day, it all comes down to negotiation.
It is also worth noting that you can negotiate and lower some of these closing costs. The title insurance fee, for example, is open to negotiation.
With closing fees, you have the option of making a one-time upfront payment out-of-pocket. This option is cost-effective as you don’t have to factor in accrued interests.
Some lenders may allow you to roll some, or even all of these closing costs into the loan, and pay interest on the same through the life of your mortgage.
Within three days of signing and filing your loan application, you will receive a Good Faith Estimate (GFE), highlighting the closing costs you can expect to pay. The final details will be in the closing disclosure that you receive three days before the day of closing.
Buying a home is a big step, so don’t take the home loan process lightly. There are a lot of terms and processes involved that you may be unfamiliar with, and that’s okay! We’re here to help. Contact us today. We’re happy to answer all of your questions you have about financing your new home.
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