Congratulations! You are prequalified for a home loan. You have been saving for a down payment, and suddenly you realize there are additional costs associated with obtaining a home loan. These are called “closing costs.
Closing costs are the fees and charges in excess of the purchase price of the property that’s due at the closing of a real estate transaction. Throughout the escrow process, there are third parties—such as your title company and your mortgage lender, that have performed services. Closing costs include the fees these professionals (as well as others) charge for services to finalize the real estate transaction and your home loan.
Who Pays For Mortgage Closing Costs?
Both buyers and sellers may be subject to various closing costs. Closing costs may include fees related to the origination and underwriting of a mortgage loan, real estate commissions, taxes, and insurance premiums, as well as title and record filings. Closing costs must be disclosed in advance by law to buyers and sellers and agreed upon before a real estate deal can be completed.
Buyer’s loan closing costs on average are about $6,000. This does not include paying extra points to buy down a rate or any professional fees the buyer may have agreed to pay.
Lenders and Loan Estimates
A lender is required to provide the buyer with a loan estimate within three business days after receiving their mortgage application. This key document outlines the estimated closing costs and other important loan details. These figures might fluctuate with each closing. Closing costs can vary, but some typical ones found are an application fee, escrow fee, courier fee, escrow deposits (impounds), upfront mortgage insurance premium and private mortgage insurance premiums, flood cert, HOA transfer fees, prorations, homeowners insurance, title insurance, property tax prorations, origination fee, interest, and more.
Closing Costs in a Buyer’s vs Seller’s Market
In a buyer’s market, it is not unusual for the buyer to ask the seller to pay closing costs on behalf of the buyer. In a seller’s market, like we are currently in, a buyer would be hard pressed to find a seller to pay costs for them.
Closing costs are unavoidable when you buy a home. As you start saving up for a down payment, don’t forget to set aside extra money to cover closing costs.
Barry Nicholas is the Designated Broker at Tru Realty. He currently has active broker’s licenses in Arizona, Kansas, Missouri, and Oklahoma and is a graduate of the Realtor Institute. He also holds the Certified Residential Specialist Designation. Barry provides his clients with the expertise and acumen that addresses the ever-changing trends in home sales, property marketing, and real estate technology. As your Broker, he views customer service as his utmost priority.