Mortgages are significant financial commitments for anyone taking one out, and it’s vital to understand all facets of the funds you’ll be spending during this process. In particular, first-time homebuyers are often unaware of an area known as closing costs, which are paid near the end of the mortgage acquisition period and cover several important areas.
At Primary Residential Mortgage in Brownsville, we’re happy to explain closing costs and how they’ll impact your finances during your application process for any of our quality home loan options. Today’s blog will focus on what closing costs are and why they’re part of the equation, plus some of the common closing costs to expect and how to prepare for them in advance.
Closing Cost Basics
As we noted above, closing costs are various fees and expenses associated with the mortgage and your home purchase, which you can expect to pay during the closing process on your new home. Closing costs are in addition to the purchase price of the home and not included in it.
Generally speaking, closing costs tend to run between 2 and 4 percent of the total purchase price of your home. This can vary slightly depending on your precise situation and costs, however.
Common Closing Costs
Here are some of the frequent closing costs you should expect to pay during this process:
- Home inspection costs: Home inspections are vital before purchasing a home, allowing you as a buyer to get an objective assessment of the home and whether the asking price is fair based on its condition. Some home purchases may involve the seller covering the home inspection, but some will require the buyer to cover this cost.
- Escrow: When closing, you will potentially need to open an escrow account and may need to pay prepaid costs, such as homeowners’ insurance or property taxes.
- Attorney fees: Not all homebuyers hire attorneys, but it’s often prudent to do so.
- Lender fees: You will also pay small fees for home appraisal, lender paperwork and various other administrative needs. In some cases, these costs are folded into the mortgage itself.
- Title fees: The most significant closing cost is often title fees, which include lender title insurance, title search and others.
- Down payment: Finally, a down payment is generally considered part of the closing cost equation.
Preparing for Closing Costs
The best way to prepare for your impending closing costs is to meet with your lender to get an idea of your entire financial picture when applying for a mortgage. They’ll give you specifics on how much you can borrow and the closing expenses likely to come with your situation. You can also take the time to shop around in advance for homeowners’ insurance, home inspectors, escrow companies and others to make the closing process simpler.
For more on closing costs during a mortgage or homebuying situation, or to learn about any of our mortgage loan services, speak to the staff at Primary Residential Mortgage today.
*PRMI NMLS 3094. PRMI is an Equal Housing Lender. Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. Programs, rates, terms, and conditions are subject to change and are subject to borrower(s) qualification. This is not a commitment to lend. Opinions expressed are solely my own and do not express the views of my employer.