Don’t Forget Loan Closing Costs

Many prospective home buyers  believe you need a 20% down payment in order to buy a home. I have often written about loan programs that allow you to put as little as 3% down.  If you are a veteran, VA loans don’t require any down payment.

If you are ready to start your home search, another consideration is to make sure you have saved enough for your closing costs.

Freddie Mac defines closing costs as:

“Closing costs, also called settlement fees, will need to be paid when you obtain a mortgage.  These are fees charged by people representing your purchase, including your lender, real estate agent, and other third parties involved in the transaction. Closing costs are typically between 2 and 5% of your purchase price.”

Here is a list of just some of the fees/costs that may be included in your closing costs:

• Government recording fees
• Appraisal cost
• Credit report fee
• Lender origination and/or underwriting fees
• Title services (insurance, search fees, tax certificate)
• Tax service fees
• Survey fees

Is there any way to avoid paying closing costs?

Ask with your lender to see if there are ways to decrease or defer your closing costs. There are no-closing mortgages available, but they tend to cost you more in the long run because they have a higher interest rate.  You may have the option to include the closing costs in the new loan amount (meaning you’ll pay interest on your closing costs).

Home buyers can also negotiate the closing costs with the seller.  Sometimes the seller will agree to pay the buyer’s closing fees in order to get the deal finalized.  However, in a seller’s market, this rarely happens.

Real Estate Bottom Line

Talk to your lender early in the process to understand what your closing costs will be.  You don’t want any last minute surprises.