Unless you have a real estate background, you’ll hear many new terms throughout the home buying process. You’ve probably heard the term closing costs somewhere along the way. However, you may not know what that means for you.
What are closing costs for buyers?
Closing costs are the fees and expenses for services rendered during the home buying process. You are expected to pay these closing costs out of pocket on closing day. This is the day when you sign final paperwork and receive the keys to your new home. Some expenses will vary on a case by case basis depending on services completed during each home buying experience.
Who pays closing costs?
Typically, the buyer pays the entirety of the closing costs. Sometimes the seller will choose to pay a portion or the total amount of the expenses. If so, it’s noted as a part of your purchase agreement. Choosing to cover these costs instead of leaving it up to the seller can win brownie points if your home offer has competition from other potential 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. The 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 the 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 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 being able to determine your loan eligibility. Sometimes, the cost of retrieving your credit report is passed along to you instead of being taken care of by the lender.
- Attorney – If a lawyer is needed to assist with legal paperwork during your transaction, 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 are several reviews completed during the home buying process. Inspectors 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 Anita L. Williamson a call today at 804-305-2756 to learn more about local areas, discuss selling a house, or tour available homes for sale.