Closing Costs: What are they and how to keep them low

Know what closing costs to expect before starting your application and budget smarter.

Many first-time homebuyers don’t consider what they will have to pay apart from the down payment at closing. These charges, known as closing costs, ensure the completion of the transaction. Financing can fall apart for people who haven’t budgeted for what they will need to pay at closing.

According to ClosingCorp, the average closing costs for a single-family property was $5,749 in 2019.

These costs include attorney fees, title fees, and lender fees. They are all detailed on your loan estimate and closing disclosure. Make sure to ask your lender which of these fees you can and cannot shop for.

Attorney and title fees

The signed mortgage and/or assignment of mortgage gets filed at the county courthouse after closing by the title company. This cost is known as a recording fee. Also included in this section would be any necessary notary and escrow fees. The price of these fees is dependent on the county and state. Consumers can shop for some of these services. Ask your realtor or attorney if you are in an attorney state for estimates regarding title expense and recording fees.

Lender fees

These include the appraisal, credit report, and application fee. At closing, you may be required to pay real estate taxes coming due either quarterly or semi-annually to the municipality/state because real estate taxes are a prepaid item. Also, you may have to reimburse the seller for real estate taxes already paid. Your lender will hold escrow called aggregate adjustment for any real estate taxes and insurance that will be paid by your lender after settlement. Ask your Mortgage Loan Originator to explain.

Two ways to reduce your closing costs

1) Seller-paid closing costs: If you are buying a home, the seller may agree to cover part of your closing costs with the proceeds of the sale. Ask your realtor if this is an option.

2) Lender credits: Some or all of your closing costs can be covered by your lender, but you will be subject to a higher interest rate. With that said, it’s worth considering if you are getting ready to apply and you think you might be tight on cash at closing.


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