Closing Costs: What You Need to Know?

Closing costs are fees associated with the purchase of a house. There can be some variation depending on location. Still, usually, these costs are all-inclusive for what you would need to pay at your attorney’s office or through an escrow company. This article steps through what you need to know when purchasing a home.


What is included in closing costs?


– home appraisal fees – The house is appraised by an independent 3rd party hired by the lender typically to assess how much they will loan you based on the market value of the home and your credit score


– Mortgage interest rate buy down – Some lenders may offer lower interest rates if you pay points (extra charges) upfront. This fee varies widely between lending institutions


Homeowners insurance would pay for damages to the house if it were to catch on fire or get hit by a natural disaster. This is typically due at closing.


– Survey fees – Sometimes, but not required for the house you buy, you’ll need to pay an independent party (or company contracted by your real estate agent) to check what’s adjacent to your home and make sure there are no easements allowing people onto your property without permission


– Property taxes – Homeowners insurance may cover this cost annually, but sometimes lenders will want proof that these taxes have been paid in full before they give final approval of the house purchase


– Title search/closing protection letter – Mortgage lenders will want documentation that the house is free and clear of any problems with the title. If there are issues with house title, lenders may need to get involved with legal issues, so it is the most cost-effective for the borrower to have the house checked before purchasing it.


– Title Insurance – They do not want you suing them later on because the house wasn’t clear of liens or problems in their records.


What is the seller responsible for at closing?


Generally, sellers must pay homeowners insurance, property taxes that are due within 30 days after closing, and any pre-paid items such as homeowners association dues. The buyer may also include inspections fees in their offer, which would require repairs from the seller if the house doesn’t meet standards found by the house inspector.


What is the buyer responsible for at closing?

The buyer is responsible for the house inspection fees if agreed upon by both parties.


How much should I save?

It is recommended to save at least 3% of the total house price for closing costs. This includes money needed for homeowners insurance, property taxes, application fee (if necessary), pre-paid items such as homeowners association dues and house inspections.

What if I can’t afford all the fees?

Suppose you cannot afford all of these fees at one time. In that case, you may want to consider adding them into your loan offer so they are spread out over the life of your loan instead of due at one time which can be an extremely stressful situation on a house buyer with little money saved up. It will also lower your monthly house payment because there is more house for house money you borrow.

Keep in mind some of this process may vary if you choose to custom build your home through a contractor like McCall Homes. No matter what you choose buying new or purchasing from the market’s inventory, this article covers the majority of what you will face at closing.

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