In the Real Estate market everyone from first time home buyers to seasoned home buyers has asked the question “what are closing costs?” and “Who pays them?” since closing costs can sometimes be a confusing part of buying a home if you don’t understand where and who that money goes to.
To eliminate the confusion we’ve broken down closing costs so you know exactly what the purpose of these payments are and where the money should be paid.
What Are Closing Costs
Closing costs are typically between 2% and 5% of a home’s price.
Let’s assume that you have a traditional mortgage loan and will be responsible for paying closing costs.
Some of the closing costs you can expect to pay are:
- Fees – For your credit report, loan origination fee, attorney’s fee, homeowner’s inspection charge, appraisal fee, title search fee.
- Title insurance
- Escrow deposit
- Discount points
Who Pays Closing Costs?
You will be expected to pay all closing costs which can amount to as much as $7,500 in some cases.
By law every lender is required to give you a good faith estimate of the closing costs you can expect to pay and within one day of your closing your lender will give you closing form called a HUD-1 settlement statement which will outline your closing costs.
Can Closing Costs Be Avoided?
Yes, in some cases you can avoid paying closing costs up front by applying for a mortgage which offers no closing costs, but you may be faced with having to pay a higher interest rate down the road if you do get a mortgage loan without any closing costs. Lenders are able to do this by rolling the estimated costs into the loan, thus giving you a higher APR (annual percentage rate) which is the estimated cost of the loan including all fees.
It’s also possible that you may able to negotiate with the seller so they will pay a portion of the closing costs, but that will depend whether it is a buyers or seller’s market.
To learn more about closing costs or to view the latest Orange County homes for sale contact the Fred Sed Group today by calling us at (949) 272-0125.