Closing costs are an essential part of the mortgage process, and we know you might have questions about them. These costs, incurred at the closing of your transaction, cover a list of fees and services associated with the home buying process. To demystify the complexities surrounding these fees, we have put together a guide answering frequently asked questions (FAQs).
If you’d like to talk to us about closing costs or any other part of the mortgage process, we are here to help. contact us any time to learn more about how we can help you reach your goals in real estate.
What are closing costs?
These costs are the fees and expenses associated with the purchase of a home. They are paid at the closing, the final step of the real estate transaction, where ownership is transferred from the seller to the buyer.
The term “closing costs” is a catchall for a list of costs that are part of the process. They include things like:
- Loan origination fees
- Appraisal and inspection fees
- Title insurance and title search fees
- Attorney fees
- Escrow fees
- Prepaid property taxes and insurance
- Recording fees
- Homeowners association (HOA) fees
How much will my closing costs be?
Perhaps the question that feels most urgent or relevant is this one. You will know the exact amount of your costs well before closing on your loan, but you can estimate the amount beforehand and your loan officer will help you with that.
Closing costs typically range from 2% to 5% of the home’s purchase price. The exact amount depends on various factors, such as the loan amount, location, and specific fees applicable to your transaction.
You can use online calculators and estimates provided by your lender to get an idea of your potential closing costs. However, the final amount may vary based on negotiations and the specifics of your transaction.
Do I have to pay cash for my closing costs?
We specialize in helping our clients find creative solutions to their financing challenges, like we do with our non-QM loans. In some cases, you may have the option to roll your closing costs into the mortgage, resulting in a higher loan amount. However, this means paying interest on the closing costs over the life of the loan. We can talk more with you about whether this is an option and how to determine if it is the right fit for you.
Do all loan types have the same closing costs?
No, different loan types, such as FHA, VA, and conventional loans, may have different closing cost structures. Government-backed loans often have specific fees associated with them. This is another reason it is so essential to work with a lending team who can help you navigate the process and find the most beneficial loan for your unique situation.
Closing costs can initially seem overwhelming, but understanding each component and asking the right questions can help alleviate concerns. We are happy to talk through each of the fees and find the funding that works for you. Ready to learn more or apply for a loan today? Contact us any time.