Many people are surprised when they are told that when buying or refinancing a home there are additional costs beyond just down payment. These costs are called Closing Costs. In other words they are costs associated with closing a loan on your home or investment property.
Closing costs usually consist of:
- Credit Report Fees
- Appraisal Fees
- Lender Fees – Typically Underwriting & Processing fees
- Discount Points – This is an amount charged for a particular interest rate. (To Learn more about discount points click here)
- Title Fees – Title Search, Title Insurance
- Recording Fees & Transfer Tax – These are set by the local government as a charge to legally record & process the transaction
- Prepaids – These are pre-paid costs such as Homeowners Insurance, Property Taxes, Interest & Mortgage Insurance
- Initial Escrow – This is an initial upfront payment toward your Homeowners Insurance, Mortgage Insurance & Property taxes
As a general rule on a purchase Closing Costs are estimated at 3-5% of the Sale price of the home. Good news is that when buying a home the seller of the home can contribute toward your closing costs!
Seller Paid Closing Costs
Each loan type has a limit of how much the seller can contribute toward your closing costs. This amount is expressed as a percentage of the loan amount and generally ranges from 3-6% of the sale price.
Is the seller obligated to contribute to your Closing Costs?
No. It is not required that the seller contribute to your closing costs. But with some negotiation