What are Closing Costs for Buyers?
You’re about to embark upon a new adventure that includes the purchase of a new home. You’ve been preparing for this experience by saving money, getting your credit in good shape, and making your wish list. You’re going to hear many new real estate terms as you go through the home buying process. One term that will come up often as services are required is closing costs. What are closing costs?
The closing costs equal the sum of all fees and expenses that occur during the process of purchasing a home. This amount is paid on the day of your closing. That’s the day you’ll sign the final paperwork and take ownership of the property. It’s important to remember that no single business or person determines the final closing costs total because there are so many people involved in providing the services needed. Who pays closing costs?
Unless noted in your contract with the seller, you will be expected to pay the entire sum of the closing costs. There are times when a seller will agree to pay part or all of the costs if that’s determined during negotiations. However, being ready and willing to pay these costs could give you the edge if your offer has competition, especially if the other buyer refuses to consider paying the closing costs.
What is a good faith estimate?
When you begin the home buying process, your lender will provide you with something called a good faith estimate of the closing costs involved. Expect this amount to come in somewhere between 2 – 8 percent of the total selling price of the property. Keep in mind that this is just an estimate. It’s likely to go up before you reach closing day. In the days just prior to closing day, your lender will provide you with an itemized list of the exact fees you are expected to pay. Get with your real estate agent and go over this list to make sure nothing unnecessary was added and that there are no over-charges.
What kind of fees will I pay?
What’s included in the closing costs will vary depending on the property and services needed during the home buying process. Here is a list of possible fees and charges that could be added to the closing costs. This is not an exhaustive list, but it should give you some insight when it comes to expectations.
Credit Report – The lender will run your credit report to make sure you have the ability to replay the mortgage loan. They may cover the cost of this service, but don’t be surprised if it makes it to the list of fees.
Attorney – You are likely to have an attorney working on your behalf during the process of purchasing a house. Their fees for time and services will be included.
Origination – These fees cover time and paperwork services provided by the mortgage lender while they are processing your loan.
Title Insurance – The lender will make sure there is title insurance in place. This is to protect against something being wrong when they check out the title.
Title Search – That check out of the title we just mentioned will have fees associated. This search is done to make sure nothing is wrong with the title and that there are no outstanding liens.
Survey – The property may be surveyed by a professional to make sure the size of the property and its borders are correctly listed.
Appraisal – A professional appraiser will be secured to ensure that the property value is correct.
Inspections – There may be several different inspectors hired to investigate things like pests, structural integrity, and systems. Their fees will be included in the closing costs.
Home Warranty – This may be optional. Some sellers will include this in their offerings, but if not you may want to add it to create a buffer of protection during the first year of ownership. This policy should cover anything major repairs or replacements.
Escrow Deposit – This should include insurances and taxes.
Your real estate agent is the best source of information about the local area, buying a home, and selling a house. Give Arminé Ghevian a call today at (818) 389-4465 to ask questions about the real estate market, discuss selling your house, or to tour available homes for sale in the Los Angeles area.