Closings costs are a significant charge associated with finalizing a home mortgage loan. Usually, they amount to between 2 and 5 percent of the total loan amount. There are several different items that are considered closing costs and they are different from state to state. Some closing cost fees are negotiable.
The most common items that are part of closing costs include a home appraisal, the cost of pulling a credit report (credit check), a title search, and putting together final paperwork for signatures. These costs are accrued with every mortgage that you take out including any refinances and second mortgages.
The total amount of your closing costs is going to depend on the total amount of money you borrow and where you are going to live in the country. The average amount of closing costs for a single-family home in America in 2019 was $5,749 as reported by real estate data firm, ClosingCorp. This number is significantly different from specific states around the country. The District of Columbia has an average closing cost of $25,800, New York has an average of $12,847, while South Dakota has a very low average closing cost of just $2,159.
Estimating Your Specific Closing Costs
It is a good idea to start with the standard of a 2 to 5 percent of the total borrowed amount for expected closing costs. So for a $400,000 borrowed amount, a home buyer should expect to pay between $8,000 and $20,000 in closing costs in addition to a down payment.
The individual fees will be placed into two main categories. Property-related fees: these are any expenses that the lender accrues evaluating the home you are trying to purchase. Mortgage-related fees: these are any expenses that come up in the actual processing of the loan application. Fees vary greatly and are based on a number of things such as the location and value of the loan. It is a good idea to go over the details of the loan you choose with your lender or broker to get the best estimate of what you should expect to actually pay.
Negotiating Closing Costs
While it is not realistic to expect to pay no closing costs, there are some closing costs that can be negotiated to a better cost by a borrower. The best way to save money on closing costs is to work with an experienced local mortgage broker and allow them to shop all of your options.
Each lender will have their own specific closing costs. Make sure to look at each cost and if something is not clear, ask what the specific charge is for. These fees may be negotiable or even be waived completely.
In some cases, a buyer can negotiate with the help of their real estate agent for the seller to take on some more closing fees that the borrower traditionally pays in a home sale transaction.
Tips on Budgeting for Closing Costs
If you have only just begun thinking about purchasing a home and want your finances to be secure and ready it is a good idea to obtain preapproval and get a clear picture of how much money a bank would lend you and how much you should expect to pay out of pocket to close a home loan.
It is a very smart plan to save up for closing costs as well as the down payment. Many buyers think about putting money away for a down payment, but often times the closing costs are not thought about.
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Erika Rogers – your real estate leader in St. George, UT, and surrounding communities. She specializes in new construction, golf course communities, gated communities, 55+ adult communities, St. George luxury real estate, and Washington Utah homes in all Southern Utah communities.
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