You’ve saved up your down payment, found the perfect home and got a great rate on your mortgage. Don’t let closing costs come as a shock when you sign on the line. Understanding how much are closing costs is an essential part of making sure you are prepared to purchase your new home.
How much are closing costs? You’ll find that in most cases, mortgage closing costs are 2 to 5 percent of the purchase price of your new home. For example, the median home value in Ocala, Florida, is $142,000. This means buyers purchasing a home here might expect to pay between $2,800 and $7,100 in closing costs.
What Costs are in Closing Costs?
You’ll find that closing costs cover an assortment of fees that apply to the services and expenses that go into getting a mortgage and buying a home. These fees and services charges for buyers can include:
- Appraisal and survey fees: These fees are usually a few hundred dollars and are used to help determine the fair market value of your home.
- Attorney fees: Careful buyers and sellers often want an attorney to review contracts and fees for the review might be included with closing costs. In fact, a real estate attorney is required to oversee home closings in Florida.
- Closing or escrow fees: An escrow agent likely helped close the deal on your home and these fees cover those services.
- Home inspection fees: A typical home inspection costs between $300 and $400 and buyers might pay this fee at closing.
- Homeowner’s insurance: It is typical to pay the first year of homeowner’s insurance at closing.
- Loan origination fees: It costs money to process and underwrite a home loan. Underwriting is an essential part of the approval process and involves the lender checking your credit scores and more. These lender charges can vary and are included in closing costs.
- Mortgage points: Sometimes called discount points, mortgage points are fees paid to the lender to help you get a better interest rate on your mortgage.
- Private mortgage insurance (PMI): It is not always necessary to have the standard 20% down payment when buying your home. However, if you don’t put down enough money some lenders require you to obtain PMI to protect the lender and cover losses if you default on your loan. Your mortgage insurance premium might vary based on a number of considerations.
- Property tax: In most cases, you’ll pay 6 months of property taxes upfront at closing. How much property tax you pay depends on your location and municipality. Property taxes might be reassessed after closing and value might increase. If this happens the amount the lender set aside for taxes might need to be readjusted to cover the new amount.
- Title insurance: Title insurance policies for both the buyer and seller are based on the home sale price.
You might find a few other miscellaneous fees tacked on to your closing costs. These extra costs might include recording fees with the local government, transfer taxes, title search, credit checks and more.
Want to know how much are closing costs before you start the homebuying process? Closing costs must be transparent and disclosed before a deal can go through. Your bank is required by law to produce a Loan Estimate (LE) shortly after you submit your mortgage application. This document should be reviewed carefully. You should contact your lender if anything in the LE doesn’t add up. You’ll want to compare this document to the Closing Disclosure you get before officially closing on your home.
Who Pays Closing Costs?
You’ll find that both parties, buyers and sellers, are responsible for paying closing costs.
Buyers typically pay 2% to 5% in closing costs when purchasing a home, while the seller might be responsible for a bit more. Typical closing costs for sellers might range between 8% to 10% of the home’s selling value. Sellers pay more in closing costs because their fees typically include listing and the buyer’s agent’s commissions.
While buyers need to bring cold, hard cash (or most likely a cashier’s check) to cover their costs at closing, seller closing costs are deducted from proceeds of the home’s sale.
How Can I Avoid Paying Closing Costs?
In most cases, closing costs are a certainty that can’t be avoided. However, there are a few steps you might be able to take to reduce your closing costs. All it takes is a bit of knowledge and some negotiation. In many cases, a buyer can negotiate with mortgage lenders or the seller and let them assume some of the closing costs.
There are several tactics you might try to avoid paying closing costs.
Arrange a No-Closing Cost Mortgage with the Lender
Some buyers can work with their lender to arrange a loan without closing costs. However, you’ll likely end up paying for the closing costs in some way or another. You might see costs bundled into your mortgage payment or in the form of a higher interest rate.
Shop Around for Services
Many of the fees that make up closing costs are for the services that go into buying a home. You might be able to reduce closing costs by shopping around for these services and finding the best deal possible. You can find service providers and loan products with more competitive rates by doing your research.
Wait Until the End of the Month
As a buyer, you become responsible for paying your mortgage as soon as your home closes. You can save on closing costs by waiting until the end of the month to make the deal official. This will cut back on per diem fees and help you keep a little more money in your pocket.
Buy or Sell Your Home with Bill Blankenship
Another way you can avoid closing costs: work with an experienced Realtor like Bill Blankenship. Bill can leverage his expertise and relationships to advocate for you as a buyer. From making sense of how much are closing costs to finding the perfect home for your family, Bill is ready to guide you through your home buying journey.
Ready to reach out to one one of the top Real Estate Agents in Ocala? Contact Bill Blankenship today and get ready to enjoy an easy home buying experience.
