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What Buyers Need to Know About Closing Costs
Buying a home is a tried and trusted way to put down roots for your family and build wealth. However, it's a significant investment, and before it's down, you may be surprised by all the fees, points, and other funds you have to pour into that investment. Our REALTORS® know that last-minute surprises are never pleasant, which is why first-time homebuyers should thoroughly understand what closing costs to expect and who is expected to pay them. This is crucial because it is the buyer's responsibility to pay for many of the expenses.
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Closing Costs for Sellers
Prorated property taxes owed, as well as any transfer taxes, are the seller's responsibility. Likewise, the seller is responsible for paying the agent commission, which is usually anywhere from 5% to 8% of the sales price, title insurance, any HOA fees owed, their attorney fees, closing credits, and any escrow money they owe to the buyer. -
Closing Costs for Buyers
Buyers will have to shell out money for originating and processing the loan. Origination fees are typically 1% of the total amount of the loan. The bank will also add an application fee, which is usually around $300.
A potentially very advantageous fee that is optional is to buy points which allow buyers to reduce the long-term interest rate and thus the total amount they will pay for the loan. Points usually go for about 1% of the total loan value and allow buyers to receive a .25% reduction in the rate for every point they buy.
Buyers will also have to pay for the appraisal fee, which is usually between $300-500 dollars, $20-30 for a credit report, tax service fees, mortgage insurance, homeowner's insurance, property tax, and HOA dues. With the inclusion of HOA dues and mortgage insurance, these additional costs can easily add several thousand dollars to the home's purchase price. -
It's Not Nailed Down Until It's Nailed Down
It's not nailed down and determined who's going to pay what costs until it is spelled out in the contract. Buyers should always make sure that the responsibility for payment is clearly defined and assigned in the contract. Buyers should always work closely with their real estate agent, attorney, and lender to confirm that everything is lined up and that everyone knows who's paying what and how much they're paying. The more open the communication, the less likely surprises will pop up and risk sinking the deal. -
Ways to Save a Buck
Where there's a will, there's always a way to save money. It's possible to find mortgage lenders that don't charge origination fees. You can also find down-payment assistance programs and grants to cover closing costs. And, it's almost always possible to include the closing costs into the loan and pay these off over time. However, the disadvantage to this strategy is that you will end up paying them back with interest; thus, they will cost you more if you don't pay them off right away.
We know you have lots of questions about buying a home. We invite you to contact us to learn more about the closing costs associated with the Nassau County homes for sale or Suffolk County homes for sale you have your eye on. We will be happy to give you the answers you need to make the best decision for your goals.