Buying a new home can be very exciting.
Yet, the buying process may seem complicated and a little confusing,
especially when it comes to closing costs.
Thankfully, your friends at American Family Insurance are here to help.What are closing costs
So, what are closing costs and who pays for them?0:19In short, closing costs are all the fees, taxes
and administrative expenses required to finalize your home purchase.
Note that closing costs are separate from your down payment.
Your down payment is part of the home's purchase price that you must pay upfront
with the remainder usually being paid via a mortgage loan.
It's important to remember that closing costs do not count toward
either your down payment or your mortgage balance.
They are an additional cost.
Some lenders will combine everything you owe at closing
— both the remainder of your down payment and your closing costs and call it cash due at closing.Who pays closing costs
Now, who pays the closing costs?
The buyer or the seller?
The answer is actually both.
Some closing costs are paid by the buyer and some are paid by the seller.
Typical fees paid by the buyer include1:14loan origination fees, mortgage points,
title insurance, appraisal costs, and half of the escrow fee.
If your total down payment is less than 20% of your home's purchase price, you may also have to pay private mortgage insurance or PMI at closing.
You may also be asked to prepay property taxes, loan interest charges and homeowners insurance.
Overall, closing costs typically end up
between two and six percent of a home's purchase price.
Be sure to ask for an itemized list of your closing costs
so you know exactly how much you're paying and for what.
And if something doesn't add up or there are surprise costs.
Don't be afraid to ask your loan officer for more information.
Now that we know what buyers pay.
What about sellers?
If you're selling your home, you'll also have costs to pay at closing.2:08Typical fees paid by the seller include real estate agent commissions,transfer taxes, any pro-rated property
taxes, and half of the escrow fee.
Sellers often pay five to six percent of their homes, purchase
price and agent commissions before other taxes and fees.
So there you have it.Conclusion
Both buyers and sellers pay costs at closing.
And here's a quick tip for home buyers to help make closing costs go more smoothly
and possibly save you money too. Buy your homeowner's insurance before closing.
This way you can shop around to find the best coverage for your new home
and the best fit for your wallet.
Contact your American Family agent today to learn
how you can design your own homeowner's policy.
American Family Insurance.
