There are a lot of terms and fees that a first time home buyer may not be all too familiar with, and closing costs are no exception. Without guidance, it can be difficult to navigate through your deal and understand what you’re paying for. To break it down, closing costs are the fees associated with home purchases that are paid at the closing of a real estate transaction. Essentially, closing is the point in time when the title of the property is transferred from seller to buyer, and your new ownership takes over.
In terms of the actual cost, these fees may vary by location, type of property, and the type of loan being secured.
Homebuyers will typically pay between 2 to 5 percent of the purchase price of their home in closing fees. On average, buyers pay roughly $3,700 in closing fees and this typically does not include pre-paids such as 90 days of taxes, insurance or association fees required by the lender or builder. The lender will give you an estimate for your loan detailing all of your costs. At least three business days before closing, you should be given a closing disclosure statement by your lender. Notably, there are limitations on the number of fees that can change prior to closing or the 3 Day clock will have to start over. This minimizes the need for surprises on closing day, if so, you may have the option to walk away. Keep in mind there still could be a risk to your deposit.
Closing costs can be avoided altogether. A no-closing-cost mortgage is offered, meaning you don’t pay any of the closing costs when you close on the mortgage, but an offer like this may mean higher interest rates on the loan for not paying closing costs or even embedding the closing fees into the total mortgage owned, meaning you would end up paying interest on closing costs.
Overall, who pays the fees can be up for discussion, and the seller might agree to assume the buyer’s closing fees as part of the purchase negotiations. This is where a professional Realtor can be a huge asset.
Written by Daniela Ortiz and the Great Florida Homes Team
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