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11
Closing Costs Buyers Should Know About
If you're a first-time home buyer, you've likely thought about the style of the house you like, the size of the house you need, and how much house you can afford, but you may not be aware of the closing costs you're required to pay to your mortgage lender. To help you prepare, our real estate agents want to give you an overview of closing costs and share some helpful tips.
What Are Closing Costs?
Whether you're a first-time home buyer looking for South Bend homes for sale, moving to a different neighborhood, or refinancing your current mortgage, you can expect to pay closing costs unless you're paying cash instead of taking out a mortgage loan. Closing costs include a variety of fees and services that are paid to mortgage lenders for handling real estate transactions.
What Closing Costs Do Buyers Pay?
Closing costs are connected to all mortgage loans, so buyers can expect to pay a variety of fees for real estate services, including:
- Application Fees – Paid to process your loan request. These fees vary by lender and by state, but they average around $500.
- Appraisal fees – Paid to a professional appraiser who inspects your property for defects and determines how much the property is worth. These fees usually range from $500 to $800 depending on the property, region, and type of loan.
- Attorneys fees – Paid to a real estate attorney who draws up legal documents and coordinates closing costs for the loan. Charges vary based on local and state rates.
- Closing Fees – Paid to the attorney or escrow company that conducts closing meetings. Fees vary by state and whether an attorney must sign off on the closing.
- Credit Reporting Fees – Cover the costs of pulling credit reports and credit scores. Most fees range from $10 - $100.
- Loan Origination Fees – Paid to your mortgage lender to cover the costs of processing and underwriting your loan. You can expect to pay about 1% of your loan amount. If your loan is $350,000. fees will be $3,500.
- Private Mortgage Insurance (PMI) – Buyers who can't come up with a 20% down payment (usually required by lenders) may be required to pay these additional fees that cost up to 2% of the loan amount per year.
- Termite Inspections – Most lenders require termite inspections in addition to home inspections. The average cost is $150 -$300, depending on building materials and location.
Can Buyers Avoid Closing Costs?
Some closing costs can be negotiated with the lender, and some can be waived through special programs. There are no clear-cut rules about negotiating closing costs, but buyers usually cover the brunt of the costs (3% to 4% of the home's price) compared to sellers who usually cover (1% to 3%). Most loans allow sellers to contribute up to 6% of the sale price to the buyer as a closing-cost credit. It's a tax-deductible expense for the seller and a good way to seal the deal.
You can also look at special programs that waive closing costs:
- Close at the End of the Month – By scheduling your loan closing at the end of the month, you can cut down on per diam interest.
- Loyalty Programs – Some banks offer help with closing costs if you finance your loan with that bank.
- Military Discounts – If you're an active military member or veteran, you may qualify for home loan special funds and discounts.
South Bend is a great place to call home. If you're considering a move, contact us for information on available homes and prices in desired neighborhoods.
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