Buyer’s Closing Costs

What does it cost to close Escrow?

When you close on your real estate transaction there will be certain standard costs and expenses associated with the transfer of the property above and beyond any down payments made towards the purchase (closing costs are always on-top-of and in-addition-to the purchase price). Some of these fees will be one-time costs (non-recurring closing costs) and may be charged by specialists and service providers (real estate agents, mortgage brokers, title and escrow companies, appraisers, etc.) that you have hired to ensure that there are no problems with your new home or your new loan. Other closing expenses (recurring closing costs) will cover on-going costs collected upfront at closing like the pre-payments of mortgage interest, property taxes, hazard insurance, etc.

Keep in mind that you can also negotiate which party – you or the seller – pays for most of the closing costs (more information is provided below under “Can a seller credit the buyer for Closing Costs?”). However, depending on the County in which the property is located, the seller or buyer may be required to pay specific fees related to the property transfer, such as city/county transfer taxes and certain title insurance policies, so you should consult with your mortgage broker/lender or real estate professional for specifics.

How Much Are Closing Costs?

As a rule of thumb, closing costs to buy a home may run as high as 2 to 4 percent of the purchase price. But much of this cost depends on the points and origination fees a lender charges to make the loan, how certain property transfer fees are negotiated, as well as the buyer’s choice as to set-up an impound account to pay for property taxes and hazard insurance. For example, the total closing costs to purchase a $300,000 home could cost anywhere from approximately $3,000 to $12,000 or more.

But do not worry about being surprised at closing by the total amount of your settlement costs. As mandated by law, you will receive a "Good Faith Estimate" of closing costs at the time your loan application is submitted to the lender. The estimate provided will be based on the loan officer's past experience and will reflect his best estimate of possible settlement costs at the time of the loan submission. This estimate may not include all the closing costs you could encounter at the final closing as things tend to change from the time of the initial loan submission to the time of your final closing.

Any one in our office will be glad to review the "Good Faith Estimate" with you and answer any questions or concerns you may have regarding the estimated costs.

Can a Seller Credit the Buyer for Closing Costs?

• Always check with your lender before you negotiate an offer that involves a seller credit because the lender might not allow it.
• If you are financing 90 - 100% of the purchase price, the lender might limit the amount of the seller credit to 3% of the purchase price.
• Depending on your credit score and the amount of your down payment, the seller could be allowed to credit you as much as 6% of the purchase price.
• Lenders will not let a borrower receive cash directly from a seller at closing (different than a seller credit), regardless of what you may hear at those no-money-down seminars.

For additional information, please feel free to contact us.