What to Really Expect for Closing Costs

Whether you are buying or selling a home, the concept of closing can be confusing. Here is what to really expect for closing costs in a real estate transaction.

What to Really Expect for Closing Costs

One big thing that every person in the market for a home needs to remember are the closing costs involved with the purchase. Closing costs can be picked up by either the buyer, seller or both. The amount that will be covered by each is negotiated and decided upon prior to the purchase. It is important to know that in most circumstances the buyer is responsible for the majority of closing costs.

All closing costs are pointed out in the lender's Good Faith Estimate. It is crucial for buyers to shop around for mortgages from multiple lenders so as to obtain the lowest possible closing costs. Although good faith estimates are just as they sound, estimates and nothing more, they will still give you an idea as to which will lead to the fewest amounts of closing costs.

There are also many different factors involved in closing costs. Discount and origination points are related to the mortgage amount. Discount points refer to how much of an interest rate deduction you will receive, usually the rate being each one point of the amount given in down payment (points being equal to 1% of the loan amount) will lead to an eighth percentage deduction in the interest rate. Origination points are additional fees charged by the lender for evaluating, preparing, and submitting the mortgage loan.

Other fees to be aware of include application fees, appraisal fees, credit report fees, title search and insurance fees, survey fees, escrow fees, flood certification, lender and buyer attorney fees, and plenty of other taxes, fees, and certifications that must be purchased. The division of these fees among buyers and sellers is almost entirely a matter of negotiation, so don't be hesitant to bring up the costs during negotiations on the offer for the property.

All in all, closing costs are an annoying aspect of a home sale and can add up quickly. If you want to know what to really expect for closing costs, negotiate the responsibility prior to agreeing to the transaction and get everything in writing.

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