Closing costs

calculatorFirst time home buyers are often surprised when they find out about closing costs. Those pesky fees are in addition to the down payment. Lenders will provide detailed information about what those costs are but here are a few examples:

1. Loan origination fee

2. Appraisal fee

3. Pre-paid homeowners insurance.

4. Property taxes prorated from the day of closing and for the rest of the year.

5. Mortgage registration tax

Typical closing costs are about 3% of the purchase price which is usually not the same as the loan amount. In addition to closing costs most home buyers will make a down payment. The down payment can be as little as 3%. There isn’t any truth to the rumor that home buyers need to put 10 to 20% down to buy a home. There are some down payment assistance programs too.

Home buyers often ask sellers to pay their closing costs. Typically that means that the buyer borrows 3% more and those funds are applied to closing costs rather than going to the seller. I encourage buyers to do the math and understand that the closing costs come off of the sellers bottom line. I encourage sellers to pay attention to the bottom line and I let them know that paying the buyer’s closing costs is common and often necessary.


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