Now that lending restrictions are easing up, more and more young people in their 20s and 30s are making the move to becoming homeowners. That’s definitely great news for the economy, but it could also mean an unpleasant surprise for many millennials who go into the home buying process without knowing anything about closing costs. If you are planning to buy your first home soon, here are a few things you need to know about closing costs:
1. They are not the same as a down payment. A down payment is a specific amount of money you give to your mortgage lender as an advance payment on your mortgage. Usually, the amount is about 20% of your total mortgage. These funds are typically paid when you sign off on your loan paperwork, however, they are not considered closing costs. Closing costs include miscellaneous fees and expenses such as loan application fees, appraisal fees, and sometimes attorney’s fees. Most of these will go towards your bank or lender, and other third parties, such as the title company.
2. Closing costs are typically based on the amount of money you will borrow for your mortgage. They usually run somewhere between 2% to 5% of your home’s purchase price. So if you buy a home that costs $100,000, your closing costs will most likely range from $2,000 to $5,000.
3. Buyers are usually responsible for covering closing costs, but depending on the situation and circumstances, you can actually get your seller to cover some or even all of the closing costs. If they agree to cover them through a seller’s concessions, this means that they will basically be adding the closing costs onto the sale price of the home.
To fully understand closing costs and what they involve, it’s very important to work with an experienced and knowledgeable real estate agent who can answer any questions you may have. If you are planning to buy a home, let The Incorvaia Team make the process as easy as possible for you. Call us at 440-879-7130 today!
