Buying a home is a huge investment, but it comes with expenses home buyers need to be prepared for. You must get your finances in order, so you improve your credit score to qualify for a better interest rate. As a home buyer, you need to figure out how much home you can afford. You’ll need to save money for a down payment. Plus, you need to get pre-approved for a home loan. The list of things to do can seem endless to home buyers. But there’s one aspect of buying a home that many first-time home buyers – especially millennials – often forget about or don’t totally understand: closing costs.

Below we answer some frequently asked questions about closing costs. With this information, you’ll be better prepared when it comes to finalizing your mortgage deal.

What Are Closing Costs?

Closing costs are the fees you pay at closing when the property title is transferred from the seller to you, the buyer.

What Do They Cover?

Closing costs cover the fees for services performed during the home-buying process. Without these services, the home-buying process wouldn’t be carried out very efficiently and you may not find out issues about the property.

These costs can include fees for:

• The loan application processing
• Credit reports
• The home appraisal
• Home inspections
• Pest inspections
• Land surveyor reports
• The title company for handling the paperwork
• Lender underwriting services
• Deed recording with local government offices
• The escrow deposit for property taxes and mortgage insurance
• Attorneys
• Couriers
• Anything else involved in the process

Aren’t Closing Costs Included in My Down Payment?

No. Your down payment is the amount of money you give your mortgage lender as an advance payment on your mortgage. While you make your down payment when you sign off on your loan paperwork, this is a separate payment. It doesn’t include any closing costs.

How Much Are Closing Costs?

Your closing costs can vary based on your mortgage lender, the size of your home and its price. Generally, they run between 3% to 6% of the home’s purchase price. On average, the cost for closing is around $6,000.

Who Pays for Closing Costs?

Typically, the home buyer is the one who pays for these costs.

How Can I Avoid Paying Them?

In some cases, you can ask the seller to pay for some of these fees. However, in a seller’s real estate market, the seller is likely to say “no.” But if the seller is working hard to close the deal with you, they may pay some of your closing costs.

Another option is a low or no-closing-costs mortgage. With this type of loan, your lender will pay your closing costs for you, and roll these costs into your loan. However, a no-closing-costs mortgage usually comes with a higher interest rate. While essentially, you’re paying for your closing costs over time rather than upfront, you’re also paying interest on these fees.

An additional solution is to roll your closing costs into your mortgage. But, again, you’ll be paying interest on those fees over the next 15 to 30 years.

How Do I Find Out What My Closing Costs Will Be?

You can find out what your costs will be at closing on the Loan Estimate and Closing Disclosure Forms. These forms help you understand your mortgage and estimate the costs you’ll have to pay. You should carefully read these documents. While some figures on the estimate may change; others like the interest rate and origination fee are fixed. If you don’t understand what fee is for, or if the cost seems high, contact your lender for more information.

Ready to Purchase a New Home?

Whether you’re just starting the home-buying process or you’re getting ready to close, understanding your closing costs can help you when it’s time to finalize purchase process. When you work with mortgage broker, like Grandview Lending in Indianapolis, our mortgage experts will work with you to find the right home loan with the best terms and lowest rate for you based on your needs. We’ll answer any questions you may have about the mortgage process and your closing costs. And, we’ll help make the transaction process go as smooth as possible.

At Grandview Lending, we’re dedicated to helping you reduce the risk – and stress – of your loan process. Contact us today at 317-255-0062 for more information. We’ll help you find the best mortgage loan for not only today, but tomorrow as well.