Buyer Closing Costs: Everything You Need To Know

Buyer closing costs are the extra monies that you need in order to buy a home, in addition to the down payment. This phrase will come up when you are beginning to apply for a loan or make an offer on a home, You have several options regarding how and when you pay these fees.

What is included in buyer closing costs?

Different fees and charges are included in buyer closing costs. The fees are all listed on your Buyers/Borrowers Closing Statement, although you may need the help of a professional to interpret them. There are many documents to sign and discuss. There is nothing wrong with going through them line by line with your buyer’s agent before the meeting. Here’s what to look for with regards to costs associated with new loans:

Appraisal Fees

Fee for the Credit Report

Interest on loan

Home Owner’s insurance (1 year up front)

Property Taxes (1 year up front)

Closing Fee to Title Company

Title Charges (owner and lenders policy)

Water Transfer Fees

Your exclusive buyer’s agent will be able to give you an approximate estimate of the closing costs prior to your offer on the home. That way, you can budget appropriately.

Most of these fees and charges cannot be reduced. Nevertheless, you can shop around for home insurance. This could make a big difference in you closing costs.

When are buyer closing costs paid?

They are paid at the closing. They will be included as a lump sum along with your down payment, which is typically paid with a cashier’s check or by wiring the funds.

There are various ways to pay your closing costs.

You can pay your own closing costs, or, another alternative is to ask the seller to pay them. You will make this decision at offer time.

If you ask the seller to pay closing costs it generally increases the sale price of the home by the same amount. For example, you could offer $215,000 on a home and pay your own closing costs of approximately $5,000. Or, you can offer $220,000 on the same home, and ask the seller to pay your closing costs.

What are the pros and cons of each option?

Pros to the seller paying: you will not have to have the cash for these fees at your closing meeting. Cons to financing closing costs: You will be paying interest on your closing costs.

Buyer Pays: The up side to this option is that if you pay the closing costs yourself in “cash”, you will not pay interest on closing costs. The down side is, you will need to budget for these costs along with costs to move, any repairs that need to be made to the home before moving in, and down payment.

Make sure to include your closing cost estimate when you are developing your budget for a home. Depending on what kinds of funds you have available, it will make a big impact on the price you pay for your home.

If you want to find out more about buyer closing costs, then visit Kathleen Chiras’s site on how a buyers agent can help you with closing costs.

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