If you have a loan especially for purchasing a home, you will come to a closing cost when it comes to close the payment. In this way, many home buyers wonder how much to pay the closing cost. They may not even know that the closing cost can go lower as long as the know how to deal with it.
Understanding the closing cost is very much necessary in order to know the detail how much to pay. Closing cost is an expense that a home buyer should pay to the lender as the loan services. Thus, it implies that the amount of closing costs depends on the amount of your loan.
About Closing Costs
As we have mentioned, closing cost is the amount of money you’ll pay to the lender for the loan service. Closing cost is charged by the lender. The amount of closing cost depends not only on the amount of loan you have but also on the loan type you take and where you live.
The Amount of Closing Costs
The amount of closing costs usually starts about 3% to 6% of the amount of loan. This means that you need to pay around $6,000 to $12,000 if your loan is about $200,000. In this case, the down payment is not included in the closing cost. However, it can be negotiated based on the market type your loan is.
Closing Costs Responsibility
You may be wondering who will pay the closing costs, buyers or sellers? Both of them are responsible for paying the closing costs but the buyers will pay more. To cover the closing costs, a homeowner must negotiate with the seller called “Seller concessions”. If you have a problem to deal with the closing cost, you can conduct a seller concession.
Sellers contributes only a little amount of closing costs depending on your loan type, the percentage of your mortgage value, occupancy and down payment.
How Much A Closing Cost That A Buyer Should Pay
As we have mentioned, the buyers will pay more at the closing costs as required by the lenders and government. This means that both the lenders and government have requirements on how much a buyer should pay at the closing costs. Of course, the amount of closing cost depends on where you live, the amount and type of your loan and your lender.
It is common that 3 days before the closing meeting for closing cost, the lender will give you a closing disclosure. The closing disclosure provides a list of things to cover in the closing cost.
The Fees Covered in The Closing Disclosure
There are commonly some fees that you often see in the closing disclosure. Let’s get to know them one by one so you can have a clear description of what fees included in the closing cost.
- Application Fee
Application fee is usually charged by the lender as he/she has helped you in processing the loan. The amount of application fee depends on the lender but it can reach up to $500.
- Appraisal
Appraisal is a service provided by a third-party appraisal management company to put a value over your property. The company will send an appraiser to check the home’s safety and physical condition. The appraisal can start from $300 up to $600.
- Attorney Fees
An attorney plays the role of coordinating your closing. You must pay for the attorney’s service based on your state and local rates.
- Closing Fee
Closing fee is a fee you pay for the closing meeting conducted by your attorney. How much the fee depends on your state regulations and whether the attorney comes to the meeting or not.
- Courier Fee
Courier fee is charged to pay the transportation cost in delivering the mortgage documents. Generally, the courier fee starts around $30.
- Credit Reporting Fee
Credit reporting fee covers the cost of creating your credit report and evaluating your credit score in order that you can apply for the loan. Credit reporting fees usually start at $25.
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- Discount Points
Discount points are offered to help the home buyers reduce the interest rate. That is because they must pay money upfront on the loan. Done discount point is similar to 1% of the amount of your loan.
- FHA Mortgage Insurance
The last but not least fee that you may find on your closing disclosure is FHA Mortgage Insurance. If you have FHA loan, you will be required to pay a mortgage insurance premium upfront at closing cost.
There have been lots of things you have learnt with us. In shirt, if you want to find the details about how much you should pay at the closing cost, consult to your real estate agents.
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