There are many potential home buyers, and even sellers, who believe
that you need at least a 20% down payment in order to buy a home, or
move on to their next home. Time after time, we have dispelled this myth
by showing that there are many loan programs that allow you to put down
as little as 3% (or 0% with a VA loan).
If you have saved up your
down payment and are ready to start your home search, one other piece
of the puzzle is to make sure that you have saved enough for your
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 and 5% of your purchase price.”
We’ve recently heard from many first-time homebuyers that they wished
that someone had let them know that closing costs could be so high. If
you think about it, with a low down payment program, your closing costs
could equal the amount that you saved for your down payment.
is a list of just some of the fees/costs that may be included in your
closing costs, depending on where the home you wish to purchase is
Government recording costs
Credit report fees
Lender origination fees
Title services (insurance, search fees)
Tax service fees
Is there any way to avoid paying closing costs?
with your lender and real estate agent to see if there are any ways to
decrease or defer your closing costs. There are no-closing mortgages
but they 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).
buyers can also negotiate with the seller over who pays these fees.
Sometimes the seller will agree to assume the buyer’s closing fees in
order to get the deal finalized.
with your lender and agent early and often to determine how much you’ll
be responsible for at closing. Finding out you’ll need to come up with
thousands of dollars right before closing is not a surprise anyone is
ever looking forward to.