Unless you have experience in real estate, you’ll hear many new terms throughout the home buying process. It’s best to ask questions about terms you don’t understand to keep from making costly mistakes. One phrase that comes up frequently is closing costs. Once your offer is accepted, you may find yourself needing to pay closing costs, but what does that mean for you?
What are closing costs?
The fees and expenses that accumulate for services during the transaction are considered closing costs. The list of expenditures may include attorney services, inspections, appraisals, and other necessary steps to securing the property.
Who pays closing costs?
Unless noted in the contract, the buyer pays the entire amount of closing costs. The seller may agree to handle those expenses under certain circumstances. The purchase agreement spells out the details if the seller is taking over part or all of this responsibility. Keep in mind that choosing to pay these fee 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. Typically, closing costs are around 2 to 8 percent of the home’s selling price. Use this estimate to help you plan and create a savings cushion. You receive an accurate, itemized list of expenses that includes all fees right before closing day. Meet with your real estate agent to go over this list. Discuss items you feel are inflated or incorrect.
What kind of fees will I pay?
The costs associated with your transaction will vary based on the needs that arise during the process. We can’t predict every service that will show up on your list, but here is an example of possible charges:
- Credit Report – A copy of your credit report is crucial to a mortgage lender being able to determine your loan eligibility. The cost of retrieving your credit report may be passed along to you instead of paid by the bank.
- Attorney – If a lawyer is needed to assist with legal paperwork during your transaction, there will be fees that come along with services rendered.
- Origination – Your mortgage lender has expenses associated with the time they spend processing your loan details.
- Title Insurance – If any issues arise during the title search, having title insurance protects 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 hires a professional appraiser to calculate the property’s value accurately. An appraiser has costs associated with their time.
- Inspections – There are several checks 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 Mandy Kruse a call today at 763-200-1319 to learn more about local areas, discuss selling a house, or tour available homes for sale