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Between saving for a down payment, searching for the perfect home, and applying for a mortgage, it's easy to forget about certain aspects of the home buying process. This is often the case for closing costs. When buying or refinancing a home, it's important to have a strong understanding of what additional feeds you'll need to pay before the process is over.

What is meant by closing costs?

Closing costs are all the fees and services related to finalizing your mortgage, when buying or refinancing your home loan. While the seller is expected to pay some of these fees, typically the majority of them may fall on the buyer. But how much is paid by the buyer or seller is governed by terms of the purchase agreement.

How much do they usually cost?

Ordinarily, you should expect to pay between 2%-5% of your total loan in closing costs. But remember that the purchase contract determines how much gets paid and by whom (buyer, seller). As an example, if you get approved for a loan of $200,000, you may end up paying an additional $4,000-$10,000 - this can sometimes act as a nasty surprise for home buyers. In order to minimize total payments, it is often recommended that you pay them in full up front whenever possible. In some cases, it's possible to negotiate closing costs with your mortgage lender; your lender may also be able to work them into the loan. Just remember you will end up paying interest on closing costs in addition to the principal loan if you choose this option. Many areas benefit from government-subsidized loan programs that can provide financial assistance based on certain conditions; contact our office and we will check to see if any assistance is available for you.

What do these costs consist of?

Closing costs can quickly add up.

• Application fee - This is required for credit checks and administrative costs associated with your loan application itself.
• Attorney's fees - If your state requires an attorney present at closing, they'll need to get paid.
• Prepaid interest - This covers interest that accrues between your settlement date and the date of the first payment.
• Underwriting fee - Also known as a loan origination fee, this is charged by your mortgage lender for processing your mortgage. This is one of the biggest expenses, often totaling about .5% of your total loan.
• Underwriting fee - Also known as a loan origination fee, this is charged by your mortgage lender for processing your mortgage. This is one of the biggest expenses, often totaling about .5% of your total loan.
• Appraisal Fee - A certified home appraiser charges a few hundred dollars to ensure that the home is worth what you're borrowing.
• Home inspection fee - Home inspections are similar to appraisals, but they're performed by a bank to ensure their loan is safe.
• Mortgage broker fee - You can avoid this fee by not hiring a mortgage broker, but it may result in you not finding the best mortgage deal.
• Mortgage insurance fees - Low down payments usually require mortgage insurance, which come with different fees depending on your loan type.
• Property taxes - Most often, buyers must pay two months property taxes up front.
• Homeowner's insurance premium - Most lenders require you to buy homeowner's insurance, which can lead to a premium that must be paid up front.

 

Buying a home is an exciting process, but the details can at times be complicated. At TMFFMS, we make sure that you have a thorough understanding of what you'll need to pay before agreeing to a loan, and walking you through the entire process. We are dedicated to you!

 

 

 

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