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Home Buyers - Don't Be Surprised by Closing Costs
Buying a house? Closing costs are among the most mysterious part of any home purchase.
Most buyers--especially first-time home buyers--don't know exactly what closing costs are for, how they are calculated, or how much to budget for them. It certainly doesn't help that these costs differ from each lender and each home.
One thing is for sure: There'll always be some closing costs when buying a house, and they're often the very last hurdle you'll have to clear. With that in mind, it's a good idea to prepare in advance and make them part of your strategy.
Let's look at some of the biggest questions around closing costs:
What Are Closing Costs?
Closing costs vary widely, but the most basic ones have to with paperwork. A lot of paperwork goes into the process of issuing a mortgage loan and transferring ownership of a property from one person or entity to another. Closing costs can also include things like a home inspection, reviewing the formal properties boundaries, and so on.
How Much Are Closing Costs?
Closing costs can vary significantly from one situation to another. In general, though, it's a good idea to expect closing costs to add another 10% on top of the final appraised value of the home. If a home is expected to sell for $100,000, closing costs may be anywhere from $8,000 to $12,000 on average. Closing costs can be lower, but they usually shouldn't be significantly higher.
Who is Responsible for Closing Costs?
In almost all cases, the buyer pays for 100% of the closing costs when buying a house. Negotiating for closing costs from a seller is difficult, as it is tantamount to cutting thousands off the sale price. If you discover issues with the home, such as plumbing or electrical problems, then this will give you more leverage – many buyers sell properties "as-is," however, leaving closing to you.
Can You Finance Closing Costs?
In many cases, no. Lenders can be particular about whether they'll add closing costs to your mortgage package. Sometimes, closing costs can be covered as part of a separate, smaller loan. Some programs for first-time home buyers do include closing costs, while others explicitly bar you from financing them. It all depends on the lender's policies.
Is It More Important to Make a Down Payment or Pay for Closing Costs?
In recent years, lenders have steadily become less rigid in requirements for a down payment. While a 20% down payment used to be standard when buying a house, it is now common for buyers to put down about 10%. Some buyers do not make any down payment at all. While these payments can save you money, you can't close on a home until you pay closing costs – they are priority #1.
How Can You Know What Your Closing Costs Will Be?
Closing costs are notoriously difficult to estimate. The estimate comes from your lender, but it may be inaccurate or change over time. The best way to know is to request an estimate from the lender as soon as you make a bid on a particular property. As estimates change, buyers should request an explanation immediately and review all terms in detail well before closing day.
No matter if you're looking for the best homes for sale in Mansfield or properties anywhere else in Ohio, a good real estate agent is your best ally throughout the process. Our REALTORS® know what it takes to get you from pre-approval to closing as smoothly and quickly as possible.
Contact Haring Realty today for help buying or selling your home.
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