There are many potential homebuyers, and even sellers, who believe that you 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 there are many loan programs that 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.
“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 recently heard from many first-time homebuyers that they wished that someone had let them know that closing costs could be so high. 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 your lender 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, or by wrapping the closing costs into the total cost of the mortgage (meaning you’ll end up paying interest on your closing costs).
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 in order to get the deal finalized.
Bottom Line
Speak with your lender and agent early and often to determine how much you’ll be responsible for at closing. 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.
This video gives you an explanation of what the closing costs are when selling your property. This will help you prepare so you’re not surprised at the closing. Ever wonder what costs are paid by the seller and which are paid by the seller? Ann covers that too. Plus get a peek at some new homes on the market in Roy and Liberty (Ogden Valley).
Want to know what your house is worth in today's market, find out now! Yes, it's free!
Video Transcript
Hello everyone! This is Ann Zieve with the Northern Utah Home Team and Keller Williams Success Realty here to give you my weekly market update, and today we’re going to talk about closing costs, but first let’s take a look at the market and then we’ll look at some new homes on the market. Here we have the graph of our rolling market statistics, and as we’re entering into February you can see that the number of new listings is starting to increase, and if you look at where they were a year ago, it’s about at the same point. We had the dip a year ago, and we had the same dip this year, so that’s just a seasonal thing, and when you look at new solds, you can see that those are still depressed, and they were depressed a year ago too. So again, another seasonal dip, but we will expect to see both houses selling and houses getting listed increase in the months ahead, and we can see that price is staying pretty much steady.
Well, let’s take a look at what closing costs are all about for all those sellers and buyers who will be entering the market. So one thing to consider when you are buying or selling a home are closing costs. Sellers are usually aware that they will have to pay a realtor’s commission. However, sometimes they don’t take into account other closing costs they might have, and then they are surprised when they don’t make as much money on the sale of their house as they had expected. Buyers are usually wanting to buy the biggest, nicest home they can with their money. However, if they don’t set aside money to cover closing costs, they will also be surprised at closing. So what are typical closing costs? Well basically they are the cost to pay everyone involved in helping you to sell your house or to buy a home. Realtor commissions are the most well-known closing costs. Also, if a buyer is getting a loan, they are pretty aware that there are going to be loan costs such as origination fees, down payments, points, etc.
Did you also know that the title company that will be closing the cost of the loan and the transaction will also have costs such as recording fees, document prep fees, and other fees? And also title insurance is another closing cost that both sellers and buyers will have. The seller will buy a title insurance policy for the buyer to insure that they are passing clear title, and the buyer, if they are getting the loan, will buy a title insurance policy for their lender to insure that the lender is getting a clear title. So in a buyer’s market when there are more sellers than buyers, it’s pretty typical for buyers to ask the seller to pay for their closing costs, and they seller is usually pretty willing to do so. However, in a seller’s market which we had at the end of the last year where there were more buyers than sellers, sellers are less likely to pay for the buyer’s closing costs, and buyers need to plan accordingly if they want to buy a great home. A knowledgeable realtor can help you anticipate these costs so that you can factor them into your buying and selling plans to make sure you’re not surprised at the end. Contact us for more information and to help you in understanding closing costs.
So let’s take a look at some new homes on the market. First I want to show you this incredible home in Roy. It’s over 8,000 square feet on almost a half-acre. It has a four-car garage, four bedrooms, four bathrooms, three kitchens, six family rooms, a formal dining room, a library, and the list goes on and on; an elevator. It has stained-glass windows. It has a huge master bedroom suite with a loft, and this home is just an incredible home to see if you’re looking for something in Roy in the upper price range. And here’s another wonderful new listing. This one is in Eden. It’s horse property with over 3 acres. It has horse pastures, a barn with electricity, and alfalfa fields. It has a beautiful, redone kitchen that opens up into a huge family room area. There’s four bedrooms in this house as well as three baths and two family rooms and just lots of elbow room inside and out if you’re looking for a great horse property in the Eden Valley among all the mountains and close to all the great recreational activities. So that wraps up this week’s market update. If you have any questions or need more information, give us a call, and we’re happy to help you buy a home, sell a house, or invest in real estate. Until next time, keep living smart.
