When you buy a home, there's more that comes out of your pocket than just the down payment. Closing costs make up a large chunk of the money you'll have to put out to purchase a house. They can include origination fees, appraisal fees, title policies, recording fees, inspections, courier charges, reserves to set up an impound account, and fees that a lender charges. So who pays for closing costs? Is it the buyer's or seller's responsibility? Does the realtor pay? Lender411 has the answers in this article.
Generally, closing costs can range between 2 to 6 percent of the purchase price. This includes any discount points you might have to pay to the lender in order to lower your interest rate. The exact amount depends on the points and origination fees a lender charges to make the loan, which are always disclosed on the buyer's Good Faith Estimate. As an example, total closing costs to purchase a $300,000 home could cost anywhere from approximately $3,000 to $12,000--sometimes more depending on the area. There are two types of closing costs; non-recurring and recurring. We'll cover both.
Fees that are paid one time only are called non-recurring. These fees are single charges for such items as:
Recurring fees are those charges that you will pay repeatedly. They include such fees as:
The time of the year that you close will dictate how many prorated months of premiums the lender will collect to hold against future payments of taxes and insurance. Although not every loan has an impound or escrow account, loans totaling more than 80% of your purchase price will usually require these.
The answer is YES. Sellers can offer to cover or credit the closing costs to speed the sale of the property. However, you should always check with your lender before you negotiate an offer involving a seller credit, because the lender may not allow it or limit it to a certain amount. Depending on your credit score and the amount of your down payment, the lender might allow a seller to credit you as much as 6% of the purchase price--but lenders will not let a borrower receive cash from a seller at closing. You will have to reach a buyer seller contract to determine the exact terms.
Please keep in mind that states have certain specific rules about real estate transactions. What is true in California and Texas might not be ture for Florida or Ohio. Always check with your realtor and your lender what closing costs can be covered by the seller and in your state.
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