There are many potential home buyers, and even sellers, who believe that they need at least a 20% down payment in order to buy a home or move on to their next home. Time after time, we have dispelled this myth by showing that many loan programs allow you to put down as little as 3% (or 0% with a VA loan).
If you have saved up your down payment and are ready to start your home search, one other piece of the puzzle is to make sure that you have saved enough for your closing costs – not mention Prepaid items as well.
Freddie Mac defines closing costs as:
“Closing costs, also called settlement fees, will need to be paid when you obtain a mortgage. These are fees charged by people representing your purchase, including your lender, real estate agent, and other third parties involved in the transaction. Closing costs are typically between 2 and 5% of your purchase price.”
We’ve always heard from who were first-time home buyers that they wished that someone had let them know what closing costs would be. If you think about it, with a low down payment program, your closing costs could equal the amount that you saved for your down payment.
Here is a list of just some of the fees/costs that may be included in your closing costs, depending on where the home you wish to purchase is located:
- Government recording costs
- Appraisal fees
- Credit report fees
- Lender origination fees
- Title services (insurance, search fees)
- Tax service fees
- Survey fees
- Attorney fees
- Underwriting fees
Is there any way to avoid paying closing costs?
Work with us and real estate agent to see if there are any ways to decrease or defer your closing costs. There are no-closing mortgages available, but they end up costing you more in the end with a higher interest rate.
Home buyers can also negotiate with the seller over who pays these fees. Sometimes the seller will agree to assume the buyer’s closing fees to get the deal finalized, which is known in the industry as ‘seller’s concession’
Speak with us and your agent early and often to determine how much you’ll be responsible for at closing. In my opinion the mistake is made making an offer and not knowing your numbers. Ask us about our Home Express Mortgage Guarantee which will save you time and money in the home buying process.
Finding out you’ll need to come up with thousands of dollars right before closing is not a surprise anyone is ever looking forward to.