DESTINATION… THE CLOSING TABLE
So there are no surprises during the mortgage process, I always mention closing costs. Before you get the keys to your house, you’ll go to the closing table to sign loan documents and other paperwork that has to do with transferring home ownership from the seller to you.
WHAT ARE CLOSING COSTS?
Closing costs are the various fees associated with closing on a real estate transaction (such as title policies, inspection fees, mortgage origination fees, pre-paid insurance and taxes, et cetera…).
RECEIVING THE LOAN ESTIMATE
When you apply for a mortgage loan, your lender has to send you a loan estimate within three days of receiving your full application. This estimate will provide you with the dollar amount that you can expect to pay in closing costs as well as other important information (including your loan terms, estimated interest rate, and monthly payment). Of course, this is just an estimate, and it’s subject to change.
ABOUT THE CLOSING DISCLOSURE
You’ll receive another document three days prior to your closing date known as the closing disclosure. The closing disclosure outlines your final loan terms, and it also provides you with a more accurate breakdown of your mortgage closing costs.
THE MONEY FOR CLOSING
Typically, closing costs are 2% to 5% of the home’s purchase price. The total dollar amount paid in closing costs can vary vastly depending on property location and the value of the home you’re purchasing. So, in theory, if you’re buying a house with a purchase price of $300,000, your closing costs could range anywhere from $6,000 to $15,000.
INCLUDED IN CLOSING COSTS
Closing costs usually include… (one-time closing costs and fees)… points, origination fees, appraisal fee, credit report fee, flood certification, title search and lenders title insurance, attorney and closing/settlement fees, et cetera… (escrow and pre-paid expenses)… taxes and other government fees, pre-paid homeowner’s insurance, upfront mortgage insurance premiums, pre-paid interest, escrow payments, et cetera…
WHAT ELSE TO KNOW
In some instances, the seller can pay a portion of the buyer’s closing costs if they agree in negotiations. Each loan program has unique rules and guidelines for how much a seller can contribute toward the borrower’s closing costs.
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