What are closing costs?
Closing costs are the fees for services, taxes or special interest charges that surround the purchase of a home. They include upfront loan points, title insurance, escrow or closing day charges, document fees, prepaid interest and property taxes. Unless, these charges are rolled into the loan, they must be paid when the home is closed.
Who pays the closing costs?
Closing costs are usually paid for by the buyer. However, sometimes you may be able to negotiate part or all of the closing costs to be paid for by the seller. The situation will depend on the type of loan you qualify for.
How can I save on closing costs?
Studies show that the closing
costs, which can average 2 to 3 percent of a total home purchase price, are
often more costly than many buyers expect. But there are some ways to save:
*
Negotiate with the seller to pay all or part of the closing costs. The lender
must agree to this as well as the seller.
* Get a no-point loan. The
trade-off is a higher interest rate on the loan and many of these loans have
prepayment penalties. But buyers who are short on cash and can qualify for a
higher interest rate may find a no-point loan will significantly cut their
closing costs.
* Get a no-fee loan. Usually, though, these fees are wrapped
into a higher interest rate though it will save you on the amount of cash you
need upfront.
* Get seller financing. This kind of arrangement usually does
not entail traditional loan fees or charges.
* Rent the property in which
you are interested with an option to buy. That will give you more time to save
for the upfront cash needed for the actual purchase.
* Shop around for the
best loan deal. Each direct lender and each mortgage brokerage has their own fee
structure. Call around before submitting your final loan
application.
