Whether you are buying a new home or refinancing the one you’re already in, don’t let closing costs come as a surprise when it’s time to sign on the dotted line. These costs are unavoidable but necessary, so here are some descriptions and tips.
Closing costs typically include:
Some lenders charge a flat rate and some charge a percentage of the cost of the mortgage, say, for instance, 1 percent. Before you commit to a particular lender, be sure you know which method they use. Depending on the cost of your home, the difference between the two methods could cost or save you money.
A professional appraisal is a must to determine the fair market value of the home you are buying or refinancing. The appraiser will consider the condition of the home and upgrades or amenities as well as the location and recent similar home sales in the area to come up with the value of the property.
The services of a lawyer are needed to draw up the closing documents and there will be a fee charged for this service.
The title company oversees your closing as an independent entity and charge a fee for this service.
Depending on where you live, there might be additional charges for courier fees to deliver the documents to the courthouse. There may also be fees to record the transaction with the county.
Ways to Save on Closing Costs
If you are lucky enough to be house hunting in a buyer’s market, getting a motivated seller to cover some or all of the closing costs is sometimes a possibility. That is less likely to happen in the seller’s market we find ourselves in these days.
One easy way to save money on your closing costs is to close at the end of the month. The number of days left in the month after closing determines the per diem interest you pay.
Questions to Ask Your Lender
Some closing costs are negotiable, such as attorney’s fees, courier fees and recording costs. Ask your lender for a good-faith estimate, an itemized list of what will be due when you close on your mortgage loan.