Unless you come from a real estate background, you’re going to hear terms during the home buying process that are not familiar. One of the terms you may not understand fully is closing costs. When your offer on a home is accepted, you may have to pay closing costs. So, it’s a good idea to understand what that means for you.
What are closing costs?
All the fees and expenses for services that accumulate during the home buying process are known as the closing costs. On closing day, everyone involved will gather to sign paperwork. Unless the seller assumes responsibility for all or part of these expenses, you should be prepared with cash on hand to pay them on closing day. Remember that these costs will vary depending on the services needed during the transaction.
Who pays closing costs?
The buyer is expected to pay the entire amount of the closing costs. There are times when the seller agrees to take care of those expenses. If the seller assumes responsibility for the costs, you will see it noted in the purchase agreement. Keep in mind that choosing to pay these fees may tip the scales in your favor if you come into a situation that involves a bidding war with other buyers.
What is a good faith estimate?
A good faith estimate is a list of all expected closing costs provided to a buyer by a mortgage lender. Closing cost amounts usually fall around 2 to 8 percent of the home’s selling price. This estimate is an excellent way to help you financially plan for what’s to come. But, as it is just an estimate, be prepared for the final expenses to increase beyond what your mortgage lender listed. You will receive the more accurate, itemized list of expenditures before closing day that will include all fees. Before you pay these costs, meet with your real estate agent to carefully inspect the list. If you come across prices that you feel are incorrect or inflated, bring them to the attention of your lender immediately.
What kind of fees will I pay?
The costs associated with your transaction will vary based on the needs that arise during the process. While it’s hard to say exactly which fees you will be responsible for, here is an example list of charges that could appear on your itemized list:
- Credit Report: A copy of your credit report is crucial to a mortgage lender. They use it to determine your loan eligibility. Sometimes, the cost of retrieving your credit report is passed along to you.
- Attorney: If a lawyer is needed to assist with legal paperwork, there will be fees that come along with their services rendered.
- Origination: Your mortgage lender will have expenses associated with the time they spend processing your loan details.
- Title Insurance: If any issues arise during the title search, having title insurance will protect you as a buyer.
- Title Search: Having title insurance is a good idea, but it doesn’t cover the cost of performing the title search itself. Expect to see additional costs for conducting the title search.
- Survey: A professional surveyor may be asked to look over the property to make sure the borders and size are listed correctly. There will be charges for their services.
- Appraisal: Your mortgage lender will hire a professional appraiser to calculate the property’s value accurately. An appraiser will have costs associated with their time given.
- Inspections: There will be several checks to be completed during the home buying process. Inspectors will look at the structural integrity, systems, and check for pests.
Your real estate agent is the best source of information about the local community and real estate topics. Give The Callison Group a call today at 208-249-3431 to learn more about local areas, discuss selling a house, or tour available homes for sale.