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Planning for Closing Costs


Posted: May 29, 2018 by Anna Jotham

If you’ve ever purchased a home, you know the closing is a big event. It can also be a spendy one. Transferring ownership of a house involves all kinds of administrative steps—you’ll be amazed at the stack of papers you get to sign—each of which comes with a price tag. As a buyer, you’ll typically pay fees related to the mortgage loan, title, and deed, along with some property assessment fees. The seller isn’t just walking away with full pockets, however. Sellers pay a commission on the sale of the home to the selling agent(s) that could range from 5 to 8 percent of the purchase price. They may also pay for a home warranty or any repairs deemed necessary by the home inspector.


Buyers customarily cover closing costs, which include a
ll the fees for the many tasks performed in relation to processing your loan, checking your credit score, conducting a home appraisal and doing the title search. Closing costs are separate from your down payment, though you likely will be paying both at the same time. The down payment goes toward the property purchase itself, the other closing costs are related to the services performed so you can make the purchase.


Closing costs vary, but to get a rough estimate,
www.homebuyinginstitute.com, “What Happens On Closing Day?” suggests multiplying your loan total by 3 percent. In high-cost areas, they note, that figure could rise to 5 percent. Under federal law, lenders are required to give you a written estimate within three days of your loan application, so you should have a pretty solid idea of what you’ll need to pay. In addition, your Realtor can be a great resource for answering questions about exactly what fees and expenses to expect at closing.

 

Can I ask the seller to cover closing costs?

In some cases a buyer wants to explore alternatives to paying the closing costs. So it’s important to note that yes, you may ask the seller to cover closing costs. First, however, consider three questions:

  • First, what is the general vibe of the real estate market in the area you’re shopping? If there’s little inventory, sellers have more leverage in negotiating. If there’s more inventory than there are buyers, however, you have a better chance of negotiating to have the seller pay your closing costs.
  • Second, how long has the house been on the market? This may give you an idea of the seller’s level of motivation. A homeowner who is eager to sell may be more willing to cover at least some of your closing costs.
  • Finally, ask yourself how much you want this particular house. Asking the seller to cover closing costs is a little risky. If a seller receives multiple offers on a property, and only one of those offers asks them to pay closing costs, that may be the first offer they toss out the window.


A good Realtor can help you investigate the market and explore your options. Ultimately, however, the decision of whether to ask the seller to cover closing costs is up to you. If coming up with the extra money to cover the costs yourself is not realistic for you right now, you can also ask your lender to tack closing costs onto the total loan amount. This increases your mortgage loan, but not much.


Closing costs should be part of early conversations with your lender so you know what to expect and what is expected of you. Some types of loans, for instance, come with limitations on how much a seller can contribute at closing. The best advice is simple: find a Realtor and a lender with proven track records in the industry, ask a lot of questions and keep your end goal in mind.



 

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La Crosse Homes for Sale | Onalaska Homes for Sale | Black River Falls Homes for Sale | Tomah Homes for Sale Rochester Homes for Sale  | Winona Homes for Sale

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