As buyers, it can be easy to get lost in the complexity of buying a home. The anticipation of closing can overshadow the reality of closing costs and suddenly, we are over our original budget. Read more to find out how to prepare as a buyer.
Between the inspections, paperwork, and not to mention the actual move, closing on a home can be overwhelming. To avoid the surprise of closing expenses and make for a smoother process, budgeting for closing costs is a must.
According to Trulia;
“[closing costs] typically range from 2-5% of the total cost of the home, and can include title insurance, origination fees, underwriting fees, document preparation fees, and more.”
Say you are buying a home for $300,000. Your closing costs could range from $6,000 to $15,000 based on the statistic above. As the value of the home increases, so do the closing costs. Some fees you can expect to see associated with closing costs are application and lender fees, private mortgage insurance (PMI), lender and escrow pre-paids, and more. Click here for information regarding closing cost fees.
Be sure to read closing disclosures carefully. The disclosure must be signed three days prior to funding in order for the loan to close on time. The CD includes a column with original estimated and final closing costs. All closing costs will be itemized on your loan estimate and CD. In the event they are not, be sure to notify your agent with any discrepancies in the original loan estimate, or if your closing cost estimates are higher.
While all mortgage lenders and brokers are different, being informed on closing costs will help keep money in your pocket. The following are a few tips to reduce the amount you will need to bring to closing.
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- Scheduling the closing at the end of the month to cut on prepaid daily interest charges
- Comparing your loan estimate to the closing disclosure forms
- Appealing to the seller for concessions
- Shop around for lenders and other third party vendors
All in all, as prices around the area are rising, having a closing cost budget is vital to the success of closing on your home!
Source: Don’t Forget to Budget for Closing Costs – Keeping Current Matters and Understanding Mortgage Closing Costs (investopedia.com)