Closing costs are the fees associated with the purchase of a new home, which in most cases takes place at the title and escrow company that you chose to help you with your purchase. Depending on how the purchase agreement is set up, costs may be incurred by the seller, or the buyer, and are many times split between the two. In most cases, those who are buying a home will pay between 3 and 5 percent of the purchase price when negotiating closing costs. In an average American market, buyers pay roughly $3,500 in closing fees. In the beginning of the process when the lender lets the buyer know how much they qualify for, there is a rough estimate at hand, and if these numbers happen to change, a revised loan estimate can help make sure that no one is caught off guard during the process of preparing.
Many of the fees that you will run into during the closing cost process are negotiable, and some are not even necessary for a smooth transaction. You can spend quite a bit of time looking around to see what different lenders offer, and keep a trained eye out for the ones that can accommodate you with lower closing costs. Some buyers always look for smaller brokerages during their house hunt, because they may not tack on as many fees as brokerages that are affiliated with large conglomerates. However, the experience and wisdom of a larger firm may be just what you are looking for, as you may need to be sure that someone is backing you who has years of experience.
At least 3 business days prior to your closing, your selected lender will present to you the Closing Disclosure statement, which will outline in detail any fees you will incur. If you have any discrepancies, you can ask your Wilson Group buyer’s agent or the lender to explain what every line item is in detail, so you know just what you are getting into. Experienced homebuyers may only give this document a quick glance, as many of these costs are standard. If you are taken by surprise regarding any of these costs, our loyal employees will make sure that you understand every single item, and that you are satisfied with the final outcome. Here is a broad overview of some costs you can expect to see after you complete your Search for Chesterfield Homes for Sale here.
- Application Fee: This covers the cost for the lender to process your application in its entirety. It may include a credit check, appraisal, and can be negotiable depending on the lender.
- Attorney Fee: This pays for a competent lawyer to review all of the documents for solid backing and clarity, and it not required in every single state.
- Closing or Escrow Fee: This fee ultimately goes to the title or escrow company that conducts the closing. The title company or escrow sees to the closing as an independent party, and some buyers want a real estate attorney present at their closing.
- Escrow Deposit for Property Taxes and PMI: Many times during a new home purchase, you are asked to put down two months of property tax, and mortgage insurance as a sign of good faith at closing.
- FHA Insurance Premium: If you have chosen an FHA loan as your means of purchase, you are required to pay 1.75% of the entire base loan amount. If you want to, you can roll this into the entire cost of the loan, but it is not as negotiable as some other costs.
- Flood Determination: A third part accepts this payment, to make their decision about any flood zone the property may reside on. If you are located on a flood zone, you will need to separately purchase flood insurance.
- Home Inspection: This is a necessary cost to the provider who comes to verify the shape of the property, and to inspect to see if important repairs are needed before final closing.
- Homeowner’s Insurance: This covers possible damages to your home, from acts of God or other means. A primarily non-negotiable expense, the first year’s is most times due at closing.
- Lender’s Policy Title Insurance: Assures the lender that you are the primary owner, and the mortgage is valid as a lien. Ultimately protects the lender if something goes awry with the title, and is always a separate line item.
- Lead-based paint Inspection: Covers the cost of evaluating the risk of lead, which became very prevalent during the 1970’s. Not usually considered negotiable, this is a necessary process to assure the new resident’s safety.
- Loan discount points: This is a form of prepaid interest, and is doled out in the form of a lump sum payment that lowers the monthly payment for the loan’s entire lifespan.
- Origination Fee: This is what covers the administrative costs for the lender, and is usually right around 1 percent of the total loan. As of late, some mortgages are scrapping this fee, but our brokerage will guide you through any changes and extra allotments.
- Pest Inspection: This is a very worthwhile charge that covers the cost for inspection of dry rot or termites, which can be a deciding factor for many government loans. If dry rot or termites are found, some necessary repairs can really build up in price, and hold steady as a bargaining point for the buyer.
- Property Tax: Many times, lenders will want any taxes due within two months of the final purchase, and should be paid at closing. This is an expense that is heavily governed by the state, and depends highly on where you live.
- Underwriting Fee: This usually is allotted to the lender, and covers the cost that begins initially when deciding whether or not you as the buyer are viable.
- VA Funding Fee: If the VA loan was your choice to make the purchase, this is a percentage of the loan amount that the VA assesses to fund the program you as the buyer utilized for help. Recently some borrowers have been exempt from this fee, and they are taking a close look at what type of service was provided, along with the amount you can provide in the beginning as a downpayment.
We are a locally owned Real Estate team right here in RVA, and we believe our motto says it all: ALL ABOUT THE EXPERIENCE!!! We strive to make our client’s need to sell or buy a home, or even their property management needs an overall great experience. Our business model is deeply founded in the fact that it is all about the experience!