So you’ve saved your down payment, picked the perfect home and you have a closing date. You’ve probably received a statement from your lender in advance outlining the closing costs and fees you’ll need to bring along with you to the closing.
Many times buyers have no idea what is included in this expense – seemingly the second largest chunk of change they need to fork over, next to the down payment. To help clarify what all is entailed in the fees charged by your lender and paid toward the purchase of your home we spoke to an industry professional to get the details.
What Fees Are Included in Closing Costs?
Mainly lenders charge underwriting fees and processing – which together are considered “lending fees”. In addition to those charges there are a few more routine but necessary steps adding to the closing costs. These include the cost of having an appraisal done on the new home, pulling a credit report on the borrower, obtaining a flood certification as well as closing title fees on the closing date. Additionally, prepaid interest and post-paid property tax are also items we see incorporated in closing costs.
Do These Fees Vary From Lender To Lender?
This is one of the main areas, in addition to minor fluctuations in current interest rates that lenders compete with each other for new loans. We caution against paying any origination fees and discount points, which add to a percentage of your loan amount. Each lender will charge varying underwriting processing fees but appraisals usually cost within the typical range of $325 and up.
How Much Can a Seller Contribute to Closing Costs?
The maximum amount a seller can pay in closing costs is about 6% and with the market being controlled largely by buyers, many sellers offer concessions in the way of paying all or a portion of closing costs. In fact, savvy buyers know this going in to the deal and put this condition as part of their offer. Saving as much as several thousand dollars or more, this is a huge plus-point for buyers in today’s market and one that is regularly being utilized. Since closing costs can be incorporated into the loan this can also affect the interest rate buyers end up getting by a nominal amount.
It is a good idea to check with your lender or potential lenders if you are still shopping around to find out exactly what is included in their closing costs. Be sure to consult with your Realtor to compare the numbers and confirm whether you are getting the best deal. Also, it might be more beneficial to work with lenders in your Realtor’s preferred network of vendors.