What Buyers Should Know About Home Closing Costs
If you’ve never bought a home before, you may be understandably surprised to discover that there can be significant fees associated with purchasing property, aside from the price tag attached to the mortgage. The good news is that the seller generally pays the realtor’s fees, a percentage of which will go to your real estate agent. So you don’t have to pay for that. But you will be on the hook for closing costs, or the many fees for services associated with your home purchase. These fees generally equate to a percentage of the property price and they include several items, some of which may be negotiable. So before you get stuck with costs you weren’t aware of and didn’t necessarily agree to, here are a few things you should know about home closing costs.
The first thing you should do is ask your mortgage lender for an itemized list that includes estimates for anticipated closing costs. It’s likely to include fees for some or all of the following items: credit check, loan origination, appraisal, survey, property inspection, pest inspection, title search (to rule out liens and other claims on the property), title insurance, attorneys, discount points (when you buy down the interest rate on the loan), recording, underwriting, taxes, and possibly an escrow deposit of some sort, amongst other things. If you don’t understand what any of these fees are for, it’s important to ask your mortgage lender to explain them. But you should also determine which are bank fees, which are applied to third parties, and which are open for negotiation.
Generally speaking, third party fees will not be negotiable. However, you may be able to talk the lender into allowing you to select and pay for a home inspector, pest inspector, or other services out-of-pocket rather than using the bank’s preferred vendors (who may jack up their prices knowing that the bank isn’t the one footing the bill for services). It’s a long shot, but worth a try. As for fees that are generally negotiable, there’s an easy way to spot them. Each line item on your cost breakdown will feature an identification number in the 800s to the 1,300s. The numbers related to lender fees are in the 800-900 range, and these are the ones you should focus on. Ask your lender to justify these fees and if you think they are not applicable or that you are being overcharged, negotiate to have them reduced or eliminated.
The cost of buying a home can be steep, and it’s made even more expensive when you consider you’ll have to pay roughly 2-5% of the property price in closing costs. Of course, you don’t necessarily have to pay these costs alone. Often, you can get the sellers to split them with you or even cover all of the closing costs. A reliable and experienced realtor like Bill True Hilton Head Real Estate can help you to negotiate the tricky waters of closing costs, whether you’re dealing with lenders or sellers. So before you agree to pay the closing costs in full, understand what you’re paying for and get the information and advice you need to negotiate a lower price, or get out of paying closing costs altogether.
Tags: buying a home