Buying a home, whether for the first time or not, can be a stressful endeavour. It is likely the biggest investment you will ever make, so making sure you understand the process fully before you start is of the utmost importance. While the price tag of some homes may make your eyes pop, there is also the matter of closing costs that makes the investment even more costly. Unfortunately, closing costs are unavoidable. But, you can at least prepare yourself and set expectations so that when it comes time to get the keys to your new home, you aren’t shocked by additional expenses.
What are closing costs?
US News and World Report has a nice summary of what all goes into closing costs. “The term includes a variety of expenses above the purchase price of your property, such as fees for an attorney, a title search, title insurance, taxes, lender costs and some upfront housing expenses such as homeowners insurance.”
Typically, closing costs range from 2-5% of the total sale price of your home, but this will vary based on where you live. A lot of the fees are state and local government fees that are locked in based on location, but some portions are negotiable. The best way to shave some the fees off the top is by working with a qualified and knowledgeable mortgage broker.
“A lot of times, lenders are willing to negotiate in order to earn your business,” says Doug Sheridan, Director of REX Home Loans. “Working with a well-connected mortgage broker will provide you with greater leverage when negotiating. Having a lender cover some of your closing costs can really help ease the burden of buying a new home.”
Knowing what to expect
Keeping the closing cost range of 2-5% of the total sale price in your mind is a good idea when shopping for a new home. But, once you actually want to move forward with an offer on a home, you are obviously going to want a more specific report of what exactly you will have to be pay.
“The onus is on the lender to provide you a detailed outline of your closing costs,” says Sheridan. “By law, you will be provided with this list within 3 days of applying for a loan.”
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Typical closing cost fees go towards the following:
- Making sure the price you are paying for your home is actually what it’s worth.
- Title/Attorney Fees
- This fee goes toward making sure that the transfer of the home’s deed is done properly. Working with a reputable title company, like TitleShield, will ensure your property rights are fully protected as long as you own the home.
- Escrow Fees
- A good escrow company, like California First, can make all the difference when it comes to making sure all documents are prepared properly and promptly so that you close on time.
- Lender Fees
- This can be a wide range of items including administrative costs or transfer fees. There can also be broker commission included as well. A company like REX Home Loans has non-commissioned loan advisors, so that won’t be an issue.
- Home Insurance
- Make sure you are prepared for the unexpected. Finding an insurance brokerage, like REX Insurance, that tailors coverage specifically for you is important.
- Loan Interest
- Any prorated interest between close date and the first of the next month will be a part of your closing costs.
Always sit down with your mortgage broker to go over every fee and determine what can be negotiated.
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