Thursday, June 3, 2021 / by Flr Team
Closing costs are tallied up just as you’re finalizing your mortgage and about to take over the property title. Most of them are paid by the buyer, but the seller may be on the hook for a few too. Although interest rates are at a historic low, closing costs can be significant so you should factor that into your home-buying budget. Here’s some things you should know to avoid any last-minute surprises.
What exactly are mortgage closing costs?
Closing costs are the upfront fees charged to secure a loan and transfer the ownership of a property. They cover a lot of the behind-the-scenes transactions and paper pushing. The realtors, bank, title company, appraisers and document-drafting lawyers all need to get paid. The buyer typically pays most of these costs. However, this can vary among states and from deal to deal.
What exactly do closing costs pay for?
Depending on your particular transaction and interest rates, your closing costs would include local insurance fees, tax rates, local appraisal fees and other factors. But here’s a general breakdown of some of the common expenses covered by closing costs.
Title Insurance: This protects lenders from financial losses stemming from problems related to a property title, such as liens or ownership conflicts.
Government Taxes: This includes property taxes on the home, local government fees (such as recording the sale of the property) and a tax for transferring the title from the seller to the buyer.
Appraisal Fees: These are charged by an appraiser for coming to the property and assessing the home’s value to determine an appropriate loan amount.
Prepaid Expenses: These are items like homeowners insurance, property taxes, and interest until the first payment is due.
How much are closing costs?
According to the ClosingCorp, the national average closing costs for a single-family home property were $5,749 including taxes and $3,339 excluding taxes in 2019. Based on the amount you borrowed, it can vary from 2%-5%.
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