Who’s Paying For What? (The One About Closings)

Closing on a Home_Here's What You Need to Know!

You’ve found THE house. You love it and can’t wait to move in. You count down the days until you get to call the house yours, and 3 days before closing, you receive a document that tells you how much you will need to pay at closing. You are shocked! Blind-sided! What is all of this??

It seems likes closings have a little bit of a mystery around them. It’s a strange lump sum of money that you are told to pay to get your hands on your house, and it can be confusing, frustrating, and intimidating. I’m here to help debunk the mystery that is Closing Costs!

On average, the buyer will pay 2% – 7% of the cost of their home in closing costs. So if you buy a home for $200,000, you could be throwing down $4,000 to $14,000 at closing. Why is there such a variance in the percentage? Well, it depends on what state you live in, property taxes, and insurance premiums. Your lender will be able to give you a much more accurate estimate once you have found a house that you like!

Typically, this is what the Buyer pays for at closing:

  • Appraisal Fee
  • A fee for running your credit report
  • Underwriter fee- This is to assess your credit worthiness
  • A loan origination fee – The lenders will charge this for processing your loan.
  • A fee for a title search – This will unearth if there are any liens on the house.
  • Prorated Property Taxes- You will pay remaining property taxes for the year on the house upfront.
  • Inspector Fee
  • Taxes on the money you’ve borrowed for your loan
  • Your down payment

This is typically what the Seller will pay at closing:

  • A Title Transfer Fee
  • Taxes on Sale of Home
  • A Closing Fee- This is paid to the Title Company
  • Agent Fees – The Seller pays the real estate agent’s commissions which averages around 6% of the sale price of the home. (3% goes to the buyer’s agent and 3% goes to the seller’s agent.)
  • Attorney Fee – This is optional for the Seller, but sometimes they will hire an attorney

It might look like the buyers have to pay a ton more than sellers, but in reality, no one is getting to skip away without having to cough up some cash. As always, this list could look different in each transaction as sometimes negotiations change who pays for what.

 

So, if you’re looking at this list and starting to stress, don’t! Some of the most simple things you can do are:

  1. Meet with a financial planner. See what is really going on with your finances and make a plan with a goal in mind, like moving into a house!
  2. SAVE. It is CRAZY how much money we spend on eating out and entertainment. Cut back on some of that and you will be shocked at the money you have saved.
  3. Contact Me! If you are thinking that you might be getting ready to move or look to find a home, let’s start talking! Part of my job is walking you through the process so that I can take as much stress off of you as possible!

 

Though purchasing a home is one of the biggest purchases you will ever make, think about what you are getting:

A HOME. A place that is safe. That shelters you. That welcomes family and friends. A place where a family is built. For some, a creative space. For others, a place to relax after a long day’s work. Where you laugh, where you cry, where you dream of new things.  When you find what you’re looking for in a home, it becomes something more than just four walls and a roof. And it’s hard to stick a price tag on that.

 

 

 

 

Sources for Blog found on http://www.realtor.com

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