The ultimate goal for many renters is to save up enough money to buy their own home, but real estate costs are often a deterrent. And even when you’ve saved what you think is enough for a mortgage, the whole selling and buying process can be so confusing.
Once you start the process everything can seem simple and then all of a sudden you hit the home closing costs and all your plans are derailed. That home closing can come as a shocker for many people after they’ve done all they could to take the right steps towards getting the mortgage.
To learn more on the home closing costs among other parts of the process of mortgage closing, you should read on. Information that breaks down all those costs for you and how you should prepare is up next.
What Are Home Closing Costs?
When you finalize a mortgage, there are costs involved in the process that you probably know nothing about before you get to that point. That is where a number of clients get a shock as they expect that the down payment they have made should take care of everything.
There are, however, fees that apply when you’re in the closing stage of your mortgage. It really doesn’t matter if you buy the house or you finance it, at the end, there are fees to be paid by the buyer. Then there are fees such as real estate commissions, that are paid for by the seller.
What Are the Costs of Home Closing?
Now, after you have realised that there are costs for home closing, the next part is to know how much it costs for closing. What you should know is that every lender has their different set of requirements and costs for home closing.
The average, however, is anywhere from 2% – 5%, which means that for example, if you take a $150,000 mortgage, you have to pay fees from $3000 – $7500 upon closing. One way that you can pay for these costs, that’s if your lender allows it, is to fold them into the mortgage and pay it as part of the mortgage.
But that is the expensive route when you want to make these payments. If you want a cost effective way of making the same payment is to pay for it outright from your pocket. When you fold the cost into the loan, there’s an interest charged on it. If you pay it off one time there is no interest charged.
Another thing that you should note about the fees is that they are negotiable for most lenders. For example, and this is for most banks, if you’re a first time home owner, you can decrease your fees. You should ensure that you shop around before committing to one lender as it can help you save on your mortgage closing costs.
Fees Involved In Home Closing
You have now learned about the fees and how much they could end up denting your budget, but do you know how they are broken down? Here’s a breakdown of the fees that are involved in the closing.
Property Related Fees
- Appraisal fees – these are fees that are up to $300 for justifying if you really need the loan or not.
- Home inspection fees – Inspections are a must, especially if you’re getting a government backed-mortgage. The cost is anywhere between $300-500.
Loan Related Fees
- Application fees which usually covers the cost for applying for the loan.
- Assumption fees.
- Attorney fees are mandatory in states where an attorney’s presence is required for the closing of the mortgage.
- Prepaid Interest.
- Loan Origination fee that is around 0.5% of the loan.
- Discount points.
- Mortgage broker fees that averages from 0.5% – 2.fees.
Home closing costs can really come as a surprise to most new buyers because they might never have realized they exist. Before getting into any sort of real estate buying process it’s a great idea to sit down with your agent and ask them to tell you all of the costs you should expect from beginning to end.
A good real estate agent will have no problem doing this, and if they are reluctant then you need to find a new agent.