Closing costs are one of the most annoying parts of the home-buying process. Negotiating a good deal with a seller can be tough, but you also have to convince them to pay for closing costs too.
If you want to determine or estimate your closing costs for negotiation power, you can use a seller closing costs calculator – see here.
These closing costs may seem small, but they add up. If you're going through a traditional lender, you can expect to pay anywhere from $3,000-$5,000 in fees and miscellaneous charges.
If you're going through a private lender or loan officer or even if you're paying cash, these closing costs will still be there.
Closing costs are normally a percentage of the home purchase price that a buyer pays to a seller.
Closing costs usually include the mortgage interest rate, an origination fee, an appraisal fee, and title insurance or fees. Let’s dive a little deeper into these and some other things that could be included in closing costs.
Loan Origination Costs
A new law passed by Congress in December 2017 has mandated that loan origination costs will now be included in the closing costs for home-buyers. The new law is expected to increase the cost of buying a home – which is already one of the most expensive purchases people make.
The Consumer Financial Protection Bureau (CFPB) is looking for ways to help consumers understand the amount of money they are borrowing for home loans. This includes the fees and charges associated with obtaining a mortgage.
The CFPB has submitted recommendations to Congress regarding how to go about this process. They want lenders to be required to include loan origination costs when they close on a house sale or mortgage refinance.
Since the price of homes is on the rise, many prospective buyers find it more difficult to afford a home purchase. To ease that burden, some lenders offer discounts to first-time homebuyers.
These discounts come in different forms and can be applied at various points during the process, but all of them are designed to reduce the cost of purchasing the home.
Discount points are one type of discount offered by lenders as an incentive for first-time buyers. They are typically deducted from the down payment or closing cost rather than directly impacting monthly mortgage payments.
Appraisal fees are not always included in the house purchase costs. It is advantageous for buyers to have them included because it avoids the need to pay them separately.
Appraisal fees are often excluded from the cost of a house because they are not always required. For example, if you are buying a home that has already been appraised, you will not need to make an additional appraisal fee.
If they are required, it could be beneficial to pay them separately or within the closing costs.
One of the closing costs that can be included in house closing costs is surveying costs. Surveying costs are the costs that are incurred in determining the boundaries of a property by an official surveyor or boundary commissioner.
The surveyor will then create a legal description of the property using this information, which is used when it comes to drafting deeds for sale and purchase of land, among other things.
Title insurance is offered by many companies and it can be included in the closing costs for a house.
Title insurance is protection against the loss of your property due to an error in public records, such as a lien or deed issue. It also covers the cost of repairing damage to your property’s title if someone else has an interest in it.
Title insurance can help you save money and ensure that you have peace of mind during your home purchase.
When purchasing a home, the buyer and seller typically agree on a purchase price. Often, there are closing costs associated with the purchase of a home. The closing costs typically include items such as attorney fees and title insurance.
Attorney fees can be included in the closing costs if they are an item that is listed in the contract documents during negotiations or if they are agreed upon by both parties.
One of the closing costs that can be included in a real estate transaction is the taxes that will be incurred once the property has been closed.
The buyer will need to pay for these taxes, but they can usually be included as part of the closing costs.