Buying a home is a financial strain if you are making a sizeable down payment. This can lead to problems if you forget the hard, cold cash you will need for closing.
Closing Costs When Purchasing A Home
Everybody looking to purchase a home wonders what the average closing costs will be. It is only natural to question, especially considering how expensive the closing costs can truly be if you are not careful.
In truth, the costs aren’t much given the amount of money the home typically sells for, but they can cause problems because they usually must be paid now and in cash. Essentially, they add to the down payment amount and can cause cash flow problems for buyers.
As you might imagine, closing costs are not easy to quote. Closings in one state involve different things and costs compared to another. Closing costs related to things such as points and property taxes are dependent on the particular deal and geographic location. Some states, for instance, do not collect property taxes, which means no deposit against them must be collected at closing. All and all, you should take the following figures with a grain of salt, but at least you will have a guideline.
To protect their investment in you, most lenders roll the majority of closing costs into the payment plan for the loan. For instance, the lender will require you to pay a deposit into one of their accounts to cover future property taxes and such. If you are lucky, some creative lenders will actually roll these costs into the loan given to you.
You should expect to pay anywhere from 2 to 5% in closing costs. This will depend widely on how much your home costs and the lender you choose to go through. For example, if you were buying a home for $315,000, your closing costs would most likely sit around $6,000 give or take. You can find the cheapest closing costs by comparing estimates from a few different lenders.
The fact that you are wondering about the closing costs when purchasing a home is a good sign. It means you are thinking through the process properly. That being said, don’t rely on anything you read on the web. Get the exact terms from your lender and an escrow company.
If you have less than stellar credit, using a mortgage broker is an excellent option as they know how to beat down the costs in your favor and can also give you a solid estimate based on both their experience and the lender being used.