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What Are Typical Closing Costs?

Closing costs are the costs associated with obtaining a loan and can typically run anywhere from 4-6 % of the home price. However, this percentage can increase or decrease depending upon any number of circumstances. These are costs beyond the price of the home and must be paid at the closing or built into subsequent mortgage payments. Be sure that you discuss the estimated costs with your loan officer so that there are no surprises on the day you finalize your purchase. A Good Faith Estimate will arrive shortly after your application has been submitted to the lender which will outline your closing costs as well.

Some of the fees included are those associated with attorneys, escrow (taxes and insurance), loan processing and underwriting, title insurance (lender‘s and owner‘s policies), appraisals, inspections, credit reports, transfer fees (title and homeowner’s association if applicable), and the recording of the deed.

Buyers will also encounter what is called recurring costs that must be paid in advance, often called pre-paids. A typical mortgage payment includes your payment, interest, taxes and insurance. Often, the taxes and insurance, including mortgage insurance, are paid in advance by your lender and then included in your monthly payment. Therefore, when you first purchase the home, the initial advances made for escrow items must be paid at the closing.

In some cases, a buyer will purchase discount points that are due at closing. This is when the buyer actually buys themselves a lower interest rate and the fee for this will be included in your closing costs. Take note that a loan officer with the bank who is lending the money does not charge points. However, a broker who is searching out the best program for you may charge points, although not always. These points will be included at closing as well.

Another important thing to keep in mind is that most of these costs can be negotiable. A buyer can include provisions in their offer that make the seller responsible for paying the closing costs, either in part or as a whole. This needs to be part of the offer negotiations up front and cannot be added as a condition once the offer has been accepted since it will materially change the terms of the agreement.

Island Advantage Realty

Island Advantage Realty, LLC has established itself as an innovator and leader in the REO market throughout Metropolitan New York and Long Island. With 20 years of experience handling foreclosed and residential properties, you can rely on our knowledgeable team of agents to assist you with all of your Real Estate needs. Trust the experts. Trust Island Advantage.

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