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Everything You Need to Know About Closing Costs

Posted by admin on December 22, 2022
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If you’ve been researching homebuying, you have probably come across the term “closing costs” before, especially in one of our articles. But what exactly does closing cost mean? And who’s responsible for covering them?

 

That’s what we’re explaining in this article.

 

What are Closing Costs?

In its most general terms, closing costs are the costs that you, the buyer, must pay when closing the sale on a home.

 

Think of closing costs as a collection of fees. You’re not just paying for one thing. You’re paying for a whole lot of things at once. 

 

Generally, your closing costs are about 2 to 6 % of your loan cost. So, if you brought a house that was $250,000, you would pay $5,000 if your closing costs were 2%. 

 

You can add the amount to your loan or pay for it out of pocket, which is what lenders and brokers typically prefer you do.

 

Included in Closing Costs

Included in your closing costs are a variety of fees, including Loan Origination fees, prepaid interest, property taxes, attorney fees, home protection plans, home inspections, escrow, title policies, lender fees, natural hazard disclosures, lender fees, state/county/city transfer fee, appraisal, notary fees, and more. 

 

Sometimes, your closing cost includes flood insurance (if required by your new county) and mortgage insurance premiums.

 

What Are the Big Things I Will Be Paying For? 

So there are many things you’ll be paying for in your closing costs. But we’ll highlight some of the more considerable fees for you. 

 

The first one is property taxes. When you buy a home, you will generally cover two months’ worth of property taxes. 

 

Prepaid interest might have also piqued your interest. Prepaid interest is what you pay in advance for your mortgage, simple as that. 

 

Attorney fees might have also caught your eye. Well, in most states, an attorney is required to help close the sale of a house. As such, you, the buyer, will typically pay the attorney’s fee.

 

Both Georgia and South Carolina require you to have an attorney assist with the closing sale of a home. Your agent’s brokerage or agency will typically find an attorney for you. 

 

Another charge that might have made you stop and think for a second would be your loan origination fee. It is a charge from your lender for evaluating and preparing your mortgage loan.

 

And, of course, there’s the mortgage broker fee. If the broker helped you find a loan with one of their lenders, they would charge a small percentage of the loan’s amount.

 

Who Is Responsible for Closing Costs? 

The answer to that question is a little complicated. Usually, the responsibility lies with you, the buyer, since they are technically your closing costs. However, there are some exceptions.

 

Apply for down payment assistance from the local or state government. You might be able to get these costs covered by the government.

 

On the other hand, some sellers might pay your closing costs for you, but that depends.

 

Sellers or homebuilders often give incentives to purchase their homes in buyer’s markets.

 

One of those incentives is covering closing costs. During the negotiations, the seller might offer to pay closing costs to sell their listing. 

 

If the housing market is in the seller’s favor, such compromises are less likely to happen.

Closing Costs Are Inevitable

While you won’t spend much time on closing costs, they are inevitable and necessary for your home purchase.

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