Buyer's Closing Costs
When a buyer applies for financing, lenders are required to provide them with a good-faith estimate of closing costs associated with such a transaction. The fees vary according to several factors, including the type of loan they applied for and the terms of the purchase agreement. Keep in mind that some of the closing costs, particularly those associated with the loan application, are paid in advance. Some typical buyer closing costs include:
- The down payment
- Loan fees (application fee, credit report fees, points if applicable) * Prepaid interest * Appraisal * Mortgage insurance
- Property Inspection(s). Depending on the property, many inspections could be incurred: from general property inspection, to termite, to mold, and many more. It is all part of due diligence.
- Hazard insurance
- Title insurance (40%)
- Documentary stamps on the note
Seller's Closings Costs
If the seller has not yet paid for the house in full, the seller's most important closing cost is satisfying the remaining balance of their loan. Before the date of closing, the escrow officer will contact the seller's lender to verify the amount needed to close out the loan. Then, along with any other fees, the original loan will be paid for at the closing before the seller receives any proceeds from the sale. Other seller closing costs typically include:
Negotiable Items Include:
Negotiating Closing Costs
In addition to the sales price, buyers and sellers frequently include closing costs in their negotiations. This can be for both major and minor fees. For example, if a buyer is particularly nervous about the condition of the plumbing, the seller may agree to pay for the house inspection.
Likewise, a buyer may want to save on up-front expenditures, and so agree to pay the seller's full asking price in return for the seller paying all the allowable closing costs. There's no right or wrong way to negotiate closing costs; just be sure all the terms are written down on the purchase agreement as such as to best protect your best interests.
For a more in-depth discussion regarding customary closing costs, contact us.