Many Home Buyers are surprised to learn that in addition to a down payment, they may need to pay other fees at closing, commonly referred to as “closing costs”.  The amount of these fees will vary from mortgage company to mortgage company.  A good estimate is about 3-3.5% of the purchase price of the home.  

When you are buying your first home, it may be hard for you to come up with enough money for both a down payment and closing costs.  Many first time Home Buyers ask for closing cost assistance from the Seller.  Most mortgage programs will permit the Sellers to help the Buyer pay for their closing costs.  All you need is the Seller’s consent.  Your Realtor will ask the Seller for this assistance when they write up the contract on your new home.  Asking the seller for closing cost help is very commonly done, especially when buying your first home.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

Let’s start by explaining what a “closing” is.  When you buy a home, you have to pay for it.  When you sell a home, you have to transfer the ownership to the new Buyer.  The “closing” is when both of these things happen, usually at the same time.  The Buyer pays for the home by signing all the mortgage paperwork.  The mortgage bank then gives the Buyer the money to pay for the home.  The Seller signs title transfer paperwork which puts the house in the new Buyer’s name.  It takes about an hour.

As a Home Buyer, in addition to paying money for the home itself, you will have other fees to pay.  These fees are called Buyer Closing Costs.  These fees fall into four categories.

1.  There are loan related fees.  You will pay your mortgage broker a 1% origination fee (1% of the mortgage amount) and some other fees.  The other fees shouldn’t exceed $500-700.
2. There are title insurance and closer fees.  Your bank requires this insurance to make sure the title of the home is “clear” and no one else has a claim on the home.  The closer, working for the title insurance company, is the person who prepares and processes all the paperwork at closing.
3. There are miscellaneous taxes and fees.  The biggest tax is the mortgage tax which is a state tax.  This is $3.40 per $1000 of mortgage.  There are some courier fees, conservation fees etc.  These are all relatively small.
4. Finally, there are prepaid expenses.  Your bank will require you to buy and prepay for a hazard insurance policy for the first year on the home; and also pay another 2-3 months of hazard insurance premium  into a special savings account called an escrow account.  It will also require you to prepay 6-8 months of property taxes into this account.  Also you will be pre-paying the mortgage interest on the money you are borrowing through to the end of the month in which you close.  The bank uses the money in your escrow account to pay your property taxes and insurance policy when they come due.

These expenses total roughly 3-3.5% of the cost of the home.  As we have discussed in another blog on this website, you can usually negotiate with the Seller to pay these costs on your behalf.  However, these fees are a part of the usual and customary costs of buying a home.  Be sure to include them in your budgeting for a new home.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

Many Home Buyers are surprised to learn that in addition to a down payment, they may need to pay other fees at closing, commonly referred to as “closing costs”. The amount of these fees will vary from mortgage company to mortgage company. A good estimate is about 3-3.5% of the purchase price of the home.

When you are buying your first home, it may be hard for you to come up with enough money for both a down payment and closing costs. Many first time Home Buyers ask for closing cost assistance from the Seller. Most mortgage programs will permit the Sellers to help the Buyer pay for their closing costs. All you need is the Seller’s consent. Your Realtor will ask the Seller for this assistance when they write up the contract on your new home. Asking the seller for closing cost help is very commonly done, especially when buying your first home.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs. “Simple answers to home ownership questions”.