What are Closing Costs?

Closing costs the fees associated when the title of the property is transferred from the seller to the buyer. Closing costs are incurred by either the buyer or seller. Closing costs vary widely based on where you live and the property you buy. They often include things such as:

•A fee for running your credit report
•A loan origination fee, which lenders charge for processing the loan paperwork for you
•Legal fees
•Charges for any inspection required or requested by the lender or you
•Discount points, which are fees you pay in exchange for a lower interest rate
•Appraisal fee
•Title Insurance
•Title search fees
•Escrow deposit
•Underwriting fee

How much are they?

Usually, homebuyers can expect to pay between 2-5% of the purchase price in these fees. Lenders are required by law to give you a good faith estimate of what the closing costs on your home will be within three days of when you apply for a loan. Remember, though, that these are estimates.

Within a day of your closing, the lender should give you a HUD-1 settlement statement, which outlines closing fees. Many times, the amount of the fees that make up closing costs are negotiable, and if they come up too high, you are free to find another lender.

Can I avoid them?

You actually can, by getting a no-closing cost mortgage. This means you don’t pay any of the closing costs when you close on the mortgage. Typically, when a lender offers a deal like this, it does end up costing you in the long run, as you will usually have to pay a higher interest rate. Home buyers can negotiate with the seller over who pays these fees. Sometimes the seller will agree to assume the buyer’s closing fees.

Six Smart Ways to Reduce Closing Costs – Realtor.com

5 Ways to Lower Your Closing Costs – FORBES

http://abcnews.go.com/GMA/Business/story?id=1704406 – ABC News

One thought on “What, Exactly, Are Closing Costs?

  1. I was able to get the seller to pay my closing costs. It all depends on the contingencies. For example, if they want to stay 30 days and you say okay, even that may sway them. You never know. If everything is set the way they want it, and there’s nothing they really “need” from you, then you don’t really have a card to play. They’re not going to just say “sure, I’ll pay.” They have to gain something, most of the time.

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