Freddie Mac defines closing costs as follows:
“Closing costs, also called settlement fees, will need to be paid when you obtain a mortgage. These are fees charged by people representing your purchase, including your lender, real estate agent, and other third parties involved in the transaction. Closing costs are typically between 2 & 5% of your purchase price.”
Many first-time homebuyers say that they wish someone had educated them on closing cost and the added costs they can bring when purchasing a home. If you think about it, with a low down payment program, your closing costs could potentially equal the amount you saved for your entire down payment.
Here is a list of some of the fees/costs that may be included, depending on where the home you wish to purchase is located:
- Government recording costs
- Appraisal fees
- Credit report fees
- Lender origination fees
- Title services (search fees)
- Tax service fees
- Survey fees
- Inspection fees
- Attorney fees
- Underwriting fees
Is There Any Way to Avoid Paying Closing Costs?
Discuss closing costs with your mortgage loan officer and real estate agent to determine if there are ways you can lower your closing costs. There are no-closing cost mortgages available, but they may end up costing you more in the end with a higher interest rate, or by wrapping the closing costs into the total cost of the mortgage (meaning you’ll end up paying interest on your closing costs.
Homebuyers can also negotiate with the seller over who pays these fees. Sometimes, the seller will agree to assume the buyer’s closing costs in order to get the deal finalized.
Speak with your mortgage loan officer and real estate agent early and often during the home buying process to confirm how much you will be responsible for at closing. Your mortgage loan officer will help guide you through the financing process and help determine the best option to meet your needs.