When purchasing a home, there are several fees 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 costs are the 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 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 of 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’ll have to pay interest on your closing costs, or depending on your lender, you may face a higher interest rate on your entire loan.
About the Scott Farnan Team
The Scott Farnan Team offers clients over 25-years of real estate and client services experience, all with the indelible backing of Patterson-Schwartz Real Estate, Delaware's largest independent REALTOR® and leader in the Mid-Atlantic region. The Scott Farnan Team is prepared to guide you through the buying/selling process, connect you with trusted partners and aim to reducing the levels of stress that typically come with buying and selling a home. Contact us today to get started with your home buying, selling or real estate investment experience.