An important but little known part of the home buying process is your closing costs. Just what are they for and how much should you budget for them?
Closing costs pay for things like title policies, recording fees, inspections, courier charges, and fees that the lender charges. Other fees included are a fee for running your credit report, attorney’s fees, loan origination fee, appraisal fee and an escrow deposit, among others.
Typically, closing costs are between 2 and 5 % of the purchasing price, and are paid at the closing point, which is when the property is transferred from the seller to the buyer. You have to make sure you are prepared for the closing costs, or else your home may not close. It is also important to remember that these costs are on top of the purchasing price.
It is possible to avoid closing costs by getting a no-closing cost mortgage. But this could cost you down the road, in the way of higher interest rates, or the closing costs could just be a part of the mortgage altogether.
You will get a loan estimate by the lender, within 3 days of submitting your loan application, which detail an estimate of what the closing costs will be. This is to be regarded as a guide and not the final word for the price of the closing costs.