Buyer closing costs are the extra monies that you need in order to buy a home, in addition to the down payment. This phrase will come up when you are beginning to apply for a loan or make an offer on a home, You have several options regarding how and when you pay these fees.
What is included in buyer closing costs?
There are several different fees and charges that make up buyer closing costs. The fees will all be listed on your Buyers/Borrowers Closing Statement, and you can ask any remaining questions during closing. The closing meeting is kind of a whirlwind because there are so many documents to sign and discuss. Oftentimes people go through each document line by line with their buyer’s agent before the meeting. Here’s what to look for in your closing costs:
Costs of the Appraisal
Credit Report Fee
Interest associated with your loan
Home Owner’s insurance (1 year up front)
Property Taxes (1 year up front)
Closing Fee to Title Company
Title Charges (owner and lenders policy)
Water Transfer Fees
Your exclusive buyer’s agent will be able to give you an approximate estimate of the closing costs prior to your offer on the home. That way, you can budget appropriately.
Most of these fees and charges cannot be reduced. Nevertheless, you can shop around for home insurance. This could make a big difference in you closing costs.
When are buyer closing costs paid?
They are paid at the closing meeting. Typically they are included as a lump sum along with your down payment, which is usually paid with a cashier’s check or by wiring the funds.
There are various ways to pay your closing costs.
You can pay your own closing costs. Or, the seller to pay them. You will make this decision when you make an offer on a home.
If you ask the seller to pay closing costs it generally increases the sale price of the home by the same amount. For example, you could offer $210,000 on a home and pay your own closing costs of approximately $5,000. Or, you can offer $215,000 on the same home, and ask the seller to pay your closing costs.
There are pros and cons to both options.
Pros to the seller paying: you will not have to have the cash for these fees at your closing meeting. Cons to financing closing costs: You will be paying interest on your closing costs.
Buyer Pays: The up side to this option is that if you pay the closing costs yourself in “cash”, you will not pay interest on closing costs. The down side is, you will need to budget for these costs along with costs to move, any repairs that need to be made to the home before moving in, and down payment.
You may wish to discuss the ins and outs of your situation with your agent to decide the best course of action. In the end, many people decide to look for homes in a price range that allows them to pay their own closing costs.
Learn more about buyer closing costs. Stop by Kathleen Chiras’s site where you can find out all about how a buyer’s agent can help you with closing costs.
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