By RMM Team
A Rundown On Closing Costs and How They Affect You
It can be tricky to sift through all the figures , so we broke down what they are, how much they cost, who's responsible and how to minimize your expenses.
If you’re considering buying a home, you probably have a general idea of what you can afford to pay monthly for your mortgage. One of the things it’s important to factor in however, is how much you’ll need to prepare to pay upfront in closing costs. But what are closing costs? What are they for? And how much are they? Let’s go over some of the basics.
What are Closing Costs?
Plain and simple, closing costs are the various fees associated with purchasing a home. Both the buyer and seller have closing costs they’re responsible for before closing.
How Much Are They?
While every scenario is different, you can typically expect closing costs to total around 3% of the total sales price. In many cases, this can be negotiated, but we’ll talk more about that in a moment.
What Kinds of Fees Make Up Closing Costs?
The costs of each can vary (and sometimes negotiated away), but as an example, some of the most common costs buyers should expect to pay can include:
Home Inspection Fee
Mortgage Recording Fees
Prorated Property Taxes
Title Search Fees
Private Mortgage Insurance
Who Pays for Closing Costs?
While it may seem like an overwhelming list of costs upfront, don’t stress it.
In every mortgage transaction, there are buyer’s closing costs and seller’s closing costs. Traditionally, the buyer pays their costs and the seller pays theirs. It’s not uncommon however for some of these costs to be negotiated, as mentioned before. Having a great real estate agent is key when it comes to knowing which fees and how much is reasonable to request when negotiating these costs on your behalf.
Another way to eliminate or reduce the amount you’ll have to bring to the closing table is to find possible to roll them into your mortgage. Some home loan options allow this, while others don’t, so be sure to ask your loan officer which is best for your specific situation. While this eliminates the need to bring closing costs to the table upfront, it’s important to remember that you’re still ultimately paying them- just over the life of your loan, instead.
Want to learn more about closing costs, or find out what to expect based on your specific scenario? One of our trusted mortgage experts would be glad to answer any questions you have.
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