This article will answer the most common questions about buyers closing costs, including some ideas for minimizing paying closing costs upfront.
"Will There Always Be Closing Costs?"Yes, there are always closing costs. Whether you're the buyer or the seller or even refinancing, you're going to have closing costs. If you're the buyer, your mortgage closing costs account for about 2%-5% of the purchase price. If you're the seller, about 6% of the sales price will go toward paying realtor fees.
"Can I Roll Closing Costs into the Loan?"Typically, the only loan that allows you to include the closing costs into the mortgage is a USDA loan.
Home loans have a loan-to-value ratio (LTV ratios) that puts a cap on how much you can include in the loan. This is calculated by taking your loan amount plus the closing costs and then subtracting the down payment. The number you're left with must not exceed the LTV limit for that specific loan.
The only exception to the LTV ratio rule are USDA loans. You can include your closing costs into a USDA loan just as long as your property appraises for more than the sales price.
"Can I Have The Seller Pay for My Closing Costs?"You can negotiate with the seller to see if and how much of your closing costs, including realtor fees, they are willing to pay. One way to entice them to pay your fees is to offer to buy the home for a higher purchase price if they agree to pay for some of your costs.
You may be wondering if this is actually worth, but consider this: increasing your offer by $6000 in exchange for them paying $6000 in your closing fees amounts to only a few extra dollars a month in your mortgage payment. If you're looking for a way to save on your fees upfront, this is how you want to do it.
Note that each type of loan has a max as to how much the seller can contribute to your closing costs. Call our office for more information.
"What’s Included in My Closing Costs?"The following is not an exhaustive list, and the amounts will vary. However, you will have a precise breakdown of your closing costs when funding your home purchase with us.
- Appraisal Fee
- Attorney Fee
- Escrow Fee
- Closing Fee -charged by the title company
- Courier Fee -sent by a carrier or delivery service, though we utilize digital mortgage processing as much as possible
- Pre-Paid Interest
- Real Estate Taxes and PMI Escrow Deposit
- Pre-Paid Hazard Insurance
- Up-Front FHA MIP -applicable only on FHA loans
- Discount Points
- Flood Certificate Fee
- Recording Fees -for issuing a new deed
- Transfer Tax -vary by county
- HOA Transfer Fee Pest Inspection -required for all government-backed loans
- Title Insurance
- Title Search Fee
- Underwriting Fee
- Loan Origination Fee
- Survey Fee
- Wire Transfer Fee
- VA Funding Fee -applicable only to VA loans.