First time homebuyer closing costs come as a surprise for some new homebuyers. If the home is being purchased with a mortgage, there are extra fees that aside from the expected monthly mortgage payment. Some homes will have reduced closing costs as the builder or the seller may offer to pay a portion of the closing costs as an incentive for the buyer. The buyer may also attempt to negotiate with the seller to pay part of the fees.
To have an estimate of how much money you will need for the closing costs, talk to your lender. They will be able to give you more details on what fees you should expect and how much they will each cost. The government has required that all lenders provide a Good Faith Estimate, where you should be given the estimation of your closing costs. When you reach settlement, then you will receive the official copy of the fees in the HUD-1 Settlement Statement, a form required to be given to all borrowers.
Everybody’s closing costs will vary. They are based off of the lender’s fees and costs specific to your loan. The fees will accumulate to approximately two or three percent of the loan amount. The homebuyer will be expected to pay these costs unless an agreement had been made prior to the settlement.
The fees most typically included in the closing cost are fees for the survey, appraisal, attorney, loan application, credit report, insurance, title, and government recordation.
In addition, the majority of lenders will require the homebuyer to have an escrow account. The escrow is used to cover the property taxes and homeowner insurance. When settlement occurs, the homebuyer will have to pay into the escrow. Then, the fee for the taxes and insurance will be included in the monthly payments. Through this process, the lender is able to sue the home as collateral if the homebuyer neglects his or her payments.
If there is any uncertainty as to what you, as the homebuyer, are being required to pay, contact your lender, realtor, or title company. You should be provided all of the information necessary to settle your uneasiness.