Have You Put Aside Enough for Closing Costs?

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There are many potential homebuyers, and even sellers, who believe that you need at least a 20% down payment in order to buy a home, or move on to their next home. Time after time, we have dispelled this myth by showing that there are many loan programs that allow you to put down as little as 3% (or 0% with a VA loan).  

If you have saved up your down payment and are ready to start your home search, one other piece of the puzzle is to make sure that you have saved enough for your closing costs.

Freddie Mac defines closing costs as:

“Closing costs, also called settlement fees, will need to be paid when you obtain a mortgage. These are fees charged by people representing your purchase, including your lender, real estate agent, and other third parties involved in the transaction. Closing costs are typically between 2 and 5% of your purchase price.”

We’ve recently heard from many first-time homebuyers that they wished that someone had let them know that closing costs could be so high. If you think about it, with a low down payment program, your closing costs could equal the amount that you saved for your down payment.

Here is a list of just some of the fees/costs that may be included in your closing costs, depending on where the home you wish to purchase is located:

  • Government recording costs
  • Appraisal fees
  • Credit report fees
  • Lender origination fees or points
  • Title services (insurance, search fees)
  • Tax service fees
  • Survey fees
  • Attorney fees (not in Arizona or California)
  • Underwriting fees and processing fees

Is there any way to avoid paying closing costs?
 Every home purchase uses strategy to position your financing for the best success for you and your family budget.  Your Lender will be able to provide these buying strategies for you, and a great loan officer will be sure you are well-educated on your plan and on the fees associated with financing a home.  

Once you have your plan in place, then your REALTOR® needs to be involved as when you start shopping for you new home, you will want to be sure that your Home Purchase Offer matches your Home Loan Buying Strategy.

Home buyers can also request that their REALTOR® negotiate with the seller over who pays these fees. In many cases, the seller will agree to provide Seller Concessions to assist in paying for the buyers’ closing costs.  The average seller credit is approx. 3% of the purchase price of the home and can vary from contract to contract.

Consider using the Protect Your Transaction service with your Lender as this will enable you to obtain a Buyer Credit Approved Loan (not just pre-approved, however actually credit-approved by underwriting) and when you do choose to have your REALTOR® negotiate in having the seller provider Seller Concessions, most likely the seller will feel more comfortable in agreeing to do so as you will be an extremely solid buyer.  Be sure to learn more about Protect Your Transaction.

Bottom Line

Speak with your lender and agent early and often to determine how much you’ll be responsible for at closing. Finding out you’ll need to come up with thousands of dollars right before closing is not a surprise anyone is ever looking forward to.  Be sure to be prepared and educated when you are ready to make your homeownership dreams come true.

 

Karen Jones Post Banner

AmeriFirst Financial, Inc., 1550 E. McKellips Road, Suite 117, Mesa, AZ 85203 (NMLS # 145368). 1­877­276­1974. Copyright 2017. All Rights Reserved. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates, and programs are subject to change without prior notice. All products are subject to credit and property approval. Not all products are available in all states or for all loan amounts. Other restrictions and limitations apply. AZ: Arizona Mortgage Banker License No. BK0013635; CA: Licensed by The Department of Business Oversight under the California Residential Mortgage Lending Act; CO: Regulated by the Division of Real Estate; WA: Washington Consumer Loan Company License No. CL­145368. AmeriFirst Financial, Inc. is an independent mortgage lender and is not affiliated with the Department of Housing and Urban Development (HUD) or the Federal Housing Administration (FHA). Karen Jones is a licensed loan originator at AmeriFirst Financial.,Inc. Karen Jones complies with all regulations and rules of all government agencies and regulators including the Real Estate Settlement and Procedures Act. The services provided by Karen Jones are not a condition, nor do they create any obligation for any form of remuneration for any real estate settlement service related to any referral.

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