In addition to the down payment, you’ll also have to pay closing costs — miscellaneous fees charged by those involved with the home sale, i.e.such as your lender for processing the loan, the title company for handling the paperwork, a survey, State and Local fees for recording the deed, etc.. The average closing costs percentage is usually about 2-5% of the purchase price. Nobody chooses a specific percentage number—the closing costs will just happen to add up to some percentage – there are variables that make this happen.
Your lender will give you an estimate of closing costs on the purchase of a particular house you’ve selected. This is called a “Good Faith Estimate” (“GFE”). A “GFE” is required by law. Then, the day before the closing, ask your lender for the actual “Settlement Statement” (aka “the HUD” or “the HUD-1”), which is the final and complete form with all the numbers for the sale, including the actual closing costs.
Typical Closing Costs are:
- Lender Charges
- Appraisal
- Credit Report
- Tax Service Fee/Flood Certification
- Title Policy Fees/Charges
- Survey
- Pest Inspection
- Pre-Paid Interest
- Escrow Feed
- 1 Year Homeowner Insurance
Tips about closing costs
Tip: Make sure to get the Good Faith Estimate (GFE) and Settlement Statement (HUD-1) from your Lender. Review them and compare it to the typical closing costs above. Direct any questions about it to your lender and your real estate agent.
Tip: Ask the seller to pay some of the closing costs. If you’re short on cash for the closing costs and can’t roll the closing costs into the mortgage, ask the seller if they’re willing to pay part of the closing costs. It’s not unusual for buyers to ask for this. Usually the worst that can happen is that they say no.
Tip: Get the lender to pay the closing costs. If you’re short on cash for the closing costs and can’t roll the closing costs into the mortgage, some lenders will pay part or all of the closing costs, but in exchange you’ll have to pay a higher interest rate on the loan, perhaps 0.25% or 0.50% higher. Ask your lender if this is an option if you need it.
Tip: Borrow the money from another source. If all of the above fails, try to borrow the money for the closing costs from another source.