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The money you have saved for a down payment is not the only cash you will need when buying a home. You’ll also need an additional amount to cover closing costs. More than half of homebuyers are surprised by the extra money needed at closing as found in a survey done by ClosingCorp.
New regulations have tightened, forcing mortgage lenders to disclose these costs in loan estimates, however, buyers still find themselves shocked when they see the final tally, which can add up to as much as 5% of the total loan amount.
Closing costs are fees and payments that need to be made to different individuals and organizations who are involved with the transaction of your home sale. The fees charged at your closing will be specific to you, your property’s location, and the lender and settlement service providers you choose to work with. They can include:
- Government recording costs
- Appraisal fees
- Credit report fees
- Lender origination fees
- Title services
- Tax service fees
- Survey fees
- Attorney fees
- Underwriting Fees & Processing Fees
- Escrow
- Home inspection
- Property tax
- Private Mortgage Insurance (PMI)
There are steps you can take to help bring down your closing costs:
- Schedule your closing at the end of the month. Part of your closing costs is prepaid interest charges on your mortgage for the remaining days of the calendar month. If you schedule your closing toward the end of the month, you’ll only pay these charges for a few days.
- Ask the seller to cover some of the costs. In a buyer’s market, and/or if your seller is particularly eager to complete the sale, you can ask them to cover some of the closing costs.
- Compare your loan estimate and your final closing disclosure form. Check for inconsistencies and new charges. If something doesn’t look right, bring it to the attention of your lender.