Homebuyers will be surprised to find out that there’s more to buying a house than merely coming up with the amount for their down payment. They will need money for closing costs, recording fees, courier charges, home inspections, title deeds, escrow, and various other fees that are typically charged by lenders.
In general, closing costs tend to run anywhere from 2% to 5% of the house’s total price. This means if you’re buying a $300,000 house, your closing costs could range from $6000 to $15000. Must of this depends on the origination fees a lender charges to process the loan. So it’s important to pay close attention to their fees.
Here’s a breakdown of what you can expect in terms of closing costs as a buyer.
These fees depend entirely on the lender. Some lenders will sell discount points to mortgage buyers to qualify for lower mortgage rates, while others don’t. Make sure to do your research and compare loan offers from various lenders.
This fee is used to expedite paper documents that you need to sign. These days closing can be done digitally, so you may not have to pay courier fees at all.
Credit Report Fee
The lender will check your credit report from major reporting agencies. Some creditors will do this for free if they receive discounts from reporting bureaus. This could cost you $30 at most.
These fees include property tax, homeowner’s insurance, and homeowner’s association dues. These fees are held in escrow to make sure that the money is available when it’s time to make payments. Mortgage lenders control these escrow accounts for homebuyers to reduce their risk of lending money. In general, homeowner fees include:
- Property taxes
- Homeowner’s insurance
- Homeowners’ association dues
Real Estate Commission
This is a big fee that buyers don’t always have to pay. Oftentimes, the commission charged by a broker is between 2% to 6% of the house’s total purchase price, and is then divided between the seller’s realtor and the buyer’s realtor. These fees can be negotiated to make a deal close.
Strategies to Lower Closing Costs
If you feel that the closing costs are too high, you can always negotiate them to find better deals by shopping around. You can find better deals from lenders and service providers such as title companies and homeowners’ insurance policies.
Most homebuyers don’t know that they can save a lot of money on their closing costs if they research offerings from different lenders. Also, you’re not bound to use the insurance agent or title company that your lender suggests. By doing a little bit of research, you can save hundreds, if not thousands.