Some first-time homebuyers deal with different jargons for both the home buying mortgage or refinance mortgage processes that they might not have heard before. And among these terminologies that they probably don’t hear every day is this: closing costs.
But before getting down to the nitty-gritty aspects closing costs, it’s good to understand the basics first.
What are closing costs?
These are fees that a borrower should pay at the end of the home purchase process. These costs come in when the seller turns over the property to the buyer and is generally paid out of pocket by the buyer. Also, these can be covered by the seller depending on the situation.Click to See the Latest Mortgage Rates»
What are the usual costs included at closing?
The common closing costs charged are as follows:
This cost is for the lender who will process your home loan application. Application fees are usually negotiable so it’s best to talk to your lender about it.
Closing fees cover the title company, escrow or attorney that’s handling the closing.
Although this cost is not required in every state, attorney fees are for the lawyer reviewing the closing documents.
This fee protects the homeowner from possible damages to their home in the future.
Home Inspection Fee
It’s very much recommended to give a house a proper home inspection prior to buying the house to point out any possible repairs needed.
Lender fees are, more often than not, non-negotiable. And as a buyer or borrower, it’s smart to shop around different lenders and their fees vary from the other.
Title Search Fee
This cost goes to the title company who will do a thorough search of your chosen property’s records and make sure that there’s no one else who’s claiming the said property.
Credit Report Fee
Home loan applications typically require you to give out a report on your credit score since it determines the best interest rate for you.
This goes to the appraisal company who will confirm your home’s market value.
This fee is for your lender as well. This is what you pay for the costs your lender covered from researching if you can be approved for a mortgage.
These are for your lender’s administrative costs. Usually, this is about 1% of the loan amount but there are times where lenders don’t charge an origination fee.
Is it possible to get a closing cost assistance?
Yes. It’s possible to get a closing cost assistance. Grants can cover closing costs and are especially beneficial for low-income borrowers. There are qualifications when applying for a closing cost assistance can usually be discussed with your lender or the mortgage lending company.
But other than closing cost assistance, there are other ways to cover these fees. First, it’s possible that a seller can provide assistance during closing.
Second, lenders can also help with your closing costs. For some mortgage, folding these costs into the loan can be done. But if not, you can talk to your lender if it’s possible to get some assistance from them.
Finally, friends and family can help, too. Gift funds can be used to cover the fees. Usually, conventional loans and FHA loans allow this. But before deciding to use them, make sure to talk to your lenders about the extent of gift funds to cover some of these costs.Got more questions? Our lenders can answer those.