Friday, January 15, 2021 / by Julie Paschal
When purchasing a home, there are several fees you must understand and factor into your budget before you hit the closing table. Here is what you need to know:
What are Closing Costs?
Closing Costs are 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, and property taxes.
How much are Closing Costs?
According to Zillow.com, closing costs usually total about 2 to 5 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 costs following your loan approval, and although that number can change slightly, your final costs should be similar.
How can you reduce your Closing Costs?
Some of the fees that fall under your closing costs can be reduced by doing ample research on lenders at the beginning of the homebuying 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 your closing costs.
Can you avoid upfront Closing Costs?
If you think you will be unable to afford the closing costs 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 will have to pay interest on your closing costs, or depending on your lender, you may face a higher interest rate on your entire loan.