If you're about to buy your new home, you're probably doing all that you can to save up and budget your income to make sure that you don't encounter any financial difficulties in your purchase. After all, the home's price isn't the only amount that you have to save for. Other expenses that comes with home buying are also something you need to prepare for.
These miscellaneous expenses called the closing costs are all part of the home buying process and here's what you need to understand about them:
What To Expect
Your mortgage lender has a responsibility to give you a loan estimate form and this form is designed to help you understand everything about your mortgage including key features, risks, and costs of your entire loan. Three days before closing your loan, your lender shall also give you a closing estimate so you can review all the costs of the transaction before your mortgage closes.
Breakdown Of Closing Costs
Getting estimates from different mortgage providers and comparing the figures are some of the things that you have to do. But generally, closing costs involve these: loan origination fee (a compensation to the lender who prepared your initial loan documents, around 1% of loan), loan application fee ($75 - $400), attorney's fee, lender's attorney's fee, credit check costs, mortgage insurance (around $1750), title search & title insurance for lender ($500), and title insurance for yourself.
Minor closing costs to expect include escrow fees, inspection costs, underwriting fees, notary fees, and broker's commission. For a solid figure, expect to spend around $5000 for every $100k borrowed money.
Closing costs require a big amount of extra money. This is why saving up for a new home should also mean saving up for the extra expenses that come on top of the property's price. But this doesn't mean that getting an agent should be neglected so you can save from the fees, real estate professionals will not only help you save the most in your closing costs, but they will also help you determine what your specific closing costs are.
