How Much Cash Will You
Need To Close?
For first time buyers, the
amount of money that is needed to seal the deal can often come as a bit of a
shock. Known as the closing costs of the
deal, this amount of money involves a number of different factors that can add
up to several thousand dollars out of pocket for the buyer. You should be prepared ahead of time to pay
this amount-or find alternative ways to take care of them.
What Things Fall Under
Closing Costs?
Some of the things you
will commonly see included in closing costs are a number of fees and types of
insurance. First of all, there are
origination fees on the loan, which are usually a percentage of the amount
financed. You will also see an appraisal
fee and a credit report fee, both of which the buyer is usually responsible
for. There are also fees for the home
inspection and other possible fees such as bank processing fees and flood
certification.
You will also have to pay
for the homeowner's insurance policy on the home for the first year in order to
close, and for title insurance. You may
also have to pay property taxes on the home.
How Much Will It Be?
All of these costs are so
varied that there is no way to guess at them.
They are determined in some cases as a percentage of the loan amount,
and in other cases based on the home itself, such as with homeowner's
insurance. In most cases, closing costs
are thousands of dollars.
You should be provided
with an estimate of the closing costs ahead of time so that you aren't shocked
with the amount at closing.
Ways To Pay
Of course, you can opt to
pay all of the closing costs out of pocket in cash, but there are other options
as well. Many people choose to roll some
or all of the closing costs into the mortgage itself, raising the monthly
payment slightly but avoiding the need for a large amount of cash. In some cases, you can also get the seller to
pay some of the closing costs, but this will need to be agreed upon ahead of
time.
Closing costs are a part
of every loan and involve paying fees for the many services required to close
on a loan. Be prepared ahead of time,
and you won't find yourself surprised by the amount that is due.