During the homebuying process it’s easy to get lost in the search period as you look for the perfect place to call home. But even before your dream home is under contract, it’s time to shift gears and think about closing day and the costs associated with closing.
Closing is the point in time when the title of the property is transferred from the seller to the buyer. At that time, a variety of closing costs, or lender and third-party fees, are paid. Closing costs can be incurred by either the buyer, or the seller. These fees typically range from 2 to 5 percent of the purchase price of their home in closing fees.
Before submitting an offer, you should talk to your real estate professional to see how closing costs are outlined in the purchase and sale agreement and understand what you will be responsible for on closing day. You should also ask your home loan provider what the anticipated closing fees are and who is responsible for paying what portions. You will see this reflected on the closing disclosures (sometimes referred to as the CD) that you’ll receive at closing.
What types of fees can I expect?
Closing costs will cover recurring (ongoing expenses) and nonrecurring (one-time) fees that are part of your transaction. Recurring closing costs are placed in an escrow account that is managed and administered by a third-party. Costs can vary depending on where you live, the type of loan you choose, and the property that you purchase.
Preparing for Closing Costs
It is best to think about closing costs well before you reach the closing table. Speak with your real estate team and the home loan lenders you are considering and ask to review closing cost estimates. Having a baseline of expected costs will be helpful as you estimate the cash you need to bring to the closing table. That way, closing day is focused on stepping into your new home, rather than surprise fees.
Our local home loan experts would be happy to answer any questions you have on the home loan process.