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What to Expect With Closing Costs

What to Expect With Closing Costs web

When preparing to buy a home, there are a few things that most people are prepared for. And when you close on a home, it means that the end of your negotiations are over, your mortgage is approved, and you and the seller are prepared for sign and have the property turned over. However, you will also need to prepare for closing costs as an expense before you finalize the purchase of your home. Here’s what you need to know about closing costs:

What are closing costs?
Closing costs are fees associated with your home purchase that are paid at the closing of a real estate transaction. These costs are typically between 2-5% of the purchase price of their home. What makes up closing costs is unique to the type of mortgage lender that you work with, as well as your location and the type of mortgage that you choose. There are multiple factors that make up closing costs, but they will usually be itemized and explained to you by your mortgage lender. Some of these fees may also be negotiable, but remember, this must be done prior to closing.

Where can I find my closing cost?
You will receive a closing disclosure by your mortgage lender 3 days before your loan closes. This document has a lot of useful information, including the amount of your loan, interest rate, monthly payment, and the closing costs.

Before you get here, you should have been given a loan estimate from your mortgage lender which would have included a summary of these costs. There are restrictions that prevent a mortgage lender from increasing these costs substantially, so this should be used as a first indicator of how much money you will need to have set aside.

How much should closing costs be?
Closing costs are typically between 2-5% of the purchase price of your home. If you purchase a home that is $150,000, your closing costs will be between $3,000 and $7,500. Because there are other costs that come with owning a home, such as mortgage insurance, it is important to be prepared to pay these costs at closing.

What factors determine the cost of closing costs?
The items that make up your closing costs can vary, but they will most likely include appraisal and attorney fees, title insurance and services, as well as local and state taxes and recording fees. These fees are all a normal part of purchasing a home, and should be easily explained by your mortgage lender.

Other costs include the set up of your escrow account for the payment of future real estate taxes and homeowner’s insurance.

Is there a way to not pay closing costs?
You can avoid pay closing costs by getting a no-closing cost mortgage. This type of mortgage does not require you to pay costs at closing. However, the buyer will usually have to pay an increased monthly interest rate to make up for these costs.

In some instances, closing costs may be paid by the seller of the home if you agree upon this in the purchase and sale agreement. Also, if you are required to move for your career, your company may be able to pay or subsidize your closing costs. It’s always worth asking.

When can I ask my mortgage lender or realtor about closing costs?
You can, and should, speak with your mortgage lender about closing costs immediately. When you apply for pre-approval, a mortgage lender or bank will typically evaluate your finances with fees like closing costs in mind. Because they are paid at closing, it is another important item to save for when planning to purchase a home.

When you are looking to purchase a home, there are a lot of things that you may have questions about. Finding a local mortgage lender that you can rely on will help you to understand everything that you need to know about this important process. Visit RatePro Mortgage to answer all of your questions.

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