Everything You Need to Know About Closing Costs

Buying a new home is an exciting and often overwhelming experience, especially for first-time homebuyers. One of the most critical factors to consider when purchasing a home is the cost, which includes the down payment and the closing costs. Closing costs are expenses beyond the price of the property that buyers need to pay before the deal is finalized.

The average closing costs depend on factors like the location of the property, the mortgage lender, the credit report, and other variables. You can also hire the best mortgage lenders in Tulsa to get you better closing costs. So whether you are a first-time homebuyer or an experienced homeowner, keep reading to learn all about closing costs and how to navigate them.

What Are Closing Costs?

Closing costs are expenses that buyers pay when purchasing a property. They are in addition to the price of the property and can include a range of fees, such as appraisal, loan origination, attorney, title, and other expenses. In general, buyers can expect to pay between 2-5% of the property's total purchase price in closing costs.

Closing costs can be paid in various ways, including through savings, financing, or as part of a mortgage loan. Some of the fees included in the closing costs may also be negotiable, and buyers should review their estimated closing costs with their lender. Additionally, your property tax, private mortgage insurance, and homeowners insurance are often included in the monthly mortgage payment. Buyers should factor these costs into their budget when considering their overall home affordability.

Thus, closing costs are an important consideration in understanding the full expense of the transaction. By budgeting appropriately and understanding the fees involved, buyers can better plan for their home purchase and ensure they make a financially sound decision.

What Are The Types Of Fees That Are Included In The Closing Costs?

Different buyers have different closing costs due to variables such as the property's condition, the lender's minimum requirements, and more. Here are some of the costs that are associated with closing costs:

Application Fee

Some lenders will charge the application fee, which can be a max of $500. This fee can be charged as a separate fee or will be added to the closing costs with the loan amount. It is a non - refundable fee, and it cannot be taken back even after you have refused to take that loan for any reason.

Closing Fee

The closing fee is a fee charged by the title company or attorney that handles the real estate transaction's closing. This fee covers the administrative costs of closing the deal, including preparing the closing documents.

Attorney Fee

Some states require that an attorney be present at the closing to review the legal documents. If this is the case, you will be responsible for paying the attorney fee.

Courier Fee

The courier fee is charged for the delivery of documents between the title company, the lender, and other parties involved in the transaction.

Credit Report Fee

Your lender will require a credit report to assess your creditworthiness. The credit report fee covers the cost of obtaining your credit report from a credit bureau.

Escrow Deposit

An escrow deposit is a money held in an escrow account to pay property taxes, homeowners insurance, and other expenses related to the property. This is often required by the lender as part of the closing costs.

FHA Mortgage Insurance

If you are getting an FHA loan, you will be required to pay upfront and ongoing mortgage insurance premiums as part of your closing costs.

Flood Certification

If your new home is in a flood zone, your lender will require a flood certification to determine if flood insurance is required.

Homeowners Association Transfer Fee

If you buy a home in a homeowners association, you may have to pay a transfer fee to take ownership.

Homeowners Insurance

You will be required to purchase homeowners insurance as a condition of your mortgage. The cost of the insurance will depend on the value of your home, location, and other factors.

Loan Origination Fee

The loan origination fee is a fee charged by the lender to cover the costs of processing your mortgage application. This fee is typically a percentage of your loan amount.

Lender's Title Insurance

The lender's title insurance protects the lender against any issues with the title of the property. The buyer typically pays this fee.

Owner's Title Insurance

The owner's title insurance protects the buyer against any issues with the title of the property. This fee is optional but highly recommended.

Pest Inspection Fee

Your lender may require a pest inspection to determine if there are any issues with pests or termites in the home.

Private Mortgage Insurance

If you put less than 20% down on your home purchase, you must pay Private Mortgage Insurance (PMI). This fee protects the lender in case you default on the loan.

Knowing closing costs before making an offer on a home is necessary because they can vary. A closing costs calculator can help you estimate your expected closing costs. Remember that these costs will be in addition to your down payment and will impact your monthly mortgage payment.

How To Reduce Your Closing Costs?

Closing costs can be a significant financial burden for homebuyers, often amounting to several thousand dollars. However, there are several strategies that homebuyers can use to reduce their closing costs. Here are some tips on how to reduce your closing costs:

• Shop Around: Before you choose a mortgage lender, compare the fees and closing costs of different lenders. This will help you find the best deal and reduce your closing costs.

• Negotiate: Don't be afraid to negotiate with your mortgage lender to lower your closing costs. Ask if they can waive or reduce certain fees, such as application fees or origination fees.

• Look for Rebates: Some mortgage lenders offer rebates to help pay closing costs. Be sure to ask your lender if they offer any rebates you may be eligible for.

• Roll the Closing Costs into the Loan: If you don't want to pay closing costs upfront, you can roll them into your mortgage. Keep in mind that this will increase your monthly mortgage payment.

• Avoid Transfer Taxes: One way to reduce closing costs is to avoid transfer taxes. You can do this by buying a home in a transfer tax-free area or negotiating with the seller to pay the transfer taxes.

In conclusion, closing costs can be high when buying a home. Shop around, negotiate with your lender, find rebates, roll closing costs into your loan, and avoid transfer taxes to lower closing costs and save money.

Bottom Line

Closing costs are inevitable when you choose to buy a home. If you have a proactive approach to shopping for home loans and closing costs, then you can significantly reduce your expenses. As you shop around, you can reach the best mortgage lenders in Tulsa to assist you and negotiate the closing costs.