1. What are real estate closing costs?
Closing costs, or settlement costs, are expenses typically incurred by the buyer over and above the purchase price of the property. Closing costs for a real estate purchase or refinance normally include title insurance, loan points, escrow or closing day charges, property taxes, and document fees
2. Who pays the closing costs?
The buyer typically pays the closing costs in a real estate transaction, although this point is subject to private negotiation.
3. How much money should I set aside for closing costs?
Closing costs usually average between two and five percent of a property’s purchase price. You can get a better idea of how much you should set aside for closing costs, however, by obtaining a good faith estimate of settlement costs from your mortgage lender.
Many buyers also use a mortgage calculator or a mortgage payment calculator to help them calculate what they can afford, but you should also check with your real estate attorney to be certain.
4. What is a loan estimate of settlement costs and how do I get one?
When you apply for a mortgage loan, your lender is required to give you a written list of the estimated settlement costs or closing costs, associated with the mortgage transaction. This list is known as a loan estimate. The closing costs reported in the loan estimate will include the lender’s charges along with the local closing agent’s fees. The loan estimate will also include the projected costs of property taxes, title insurance and homeowner’s insurance, among other things.
5. What types of things are included in the loan estimate of settlement costs?
- Credit report fee
- Property appraisal fee
- Inspection fee
- Title search and title insurance fees
- Document recording and survey fees
- Transfer taxes
- Property taxes
- Loan application fee
- Loan points and loan origination fee
- Attorney’s fees (yours and your lender’s)
- Escrow account balances
- Document preparation fees
6. How can I save money on real estate closing costs?
As mentioned earlier, closing costs can be expensive. Closing costs will typically average between two and five percent of the total purchase price of the property. But here are a few ways you can save:
- Secure a no-fee loan or a no-point loan, these loans typically have higher interest rates but can significantly reduce your closing costs
- Negotiate with the seller to have him or her pay part or all of the closing costs
- Consult with a number of different mortgage lenders to find the best deal for you in terms of price and structure
- The loan estimate that all lenders are required to provide comes in a standard form that lends itself to comparison shopping
- However, the loan estimate by itself is not the best way to compare loan packages, because you will also need to consider other loan fees and more importantly, the mortgage interest rate attached to the loan
- Remember that a good faith estimate is only an estimate and that actual fees associated with the closing may vary.
If you have more questions or concerns about possible closing costs, schedule your own free, no-obligation consultation in our Hartford office by calling toll free at 888-336-1212 between 9:00 and 5:30 Monday through Friday, or by clicking here to use our interactive calendar.