You did it! You saved up for your down payment. But wait, what’s this? Closing costs? Since they come up on closing day, it can be easy to forget about closing costs. To make sure you plan ahead, let’s talk about what is included in closing costs.
The basics of closing costs
Typically, you can count on closing costs to come in somewhere between 2% and 6% of the purchase price of the home. Closing costs include fees charged by your lender, and any third parties for their involvement in the mortgage process, and vary from lender to lender.
Closing costs can be paid for by both the buyer and the seller. As part of your closing disclosure, you will receive a detailed account of the closing costs you will be responsible for. These specific closing costs depend on the home itself, where it is located, and the type of loan you receive.
Common closing costs
Anticipating what closing costs cover can help you budget for them and can make your final steps of homebuying easier. Here are some common closing costs that homebuyers may be expected to pay:
- Appraisal fees – The cost of having an appraiser estimate the home’s market value
- Attorney fee (if required) – The fee incurred if you hired an attorney to review your loan terms
- Courier – Cost of transporting your loan documents
- Credit report – A charge for pulling your credit report from (at least 2) credit bureaus
- Home inspection – The fee to assess a property for any necessary repairs
- Recording property deed – The cost for registering the property’s ownership transfer
- Survey – A fee for the assessment of a property’s legal description
- Tax services – Charge to ensure a borrower pays property taxes on time
- Title search – The cost of looking into a home’s ownership history
Keep in mind, this is not an exact list of what your closing costs will be (they may be different based on a number of factors for your specific mortgage) but it should give you an idea of what to expect.
How to potentially lower closing costs
If you are concerned about your amount of closing costs, don’t be. There are a couple of ways you could possibly lower how much you pay in closing costs. First, you can negotiate fees with the seller to ask them to cover a portion of the closing costs.
Another possible way of reducing your closing costs is to apply for a closing cost assistance program. Most closing cost assistance programs are part of down payment assistance programs*. These programs can work double-duty for homebuyers that could benefit from more affordable mortgage options.
Remember, closing costs are unique to every homebuyer’s specific needs. Having a trusted lender on your team can help you fully understand how closing costs factor into your mortgage, and what mortgage fits your financial/home goals. Connect with your local PrimeLending loan officer today to get started.
*Certain restrictions apply, subject to down payment assistance program guidelines. Not available in all areas. Please contact your PrimeLending loan officer for more details.
