Closing costs are one of the main things we hear buyers are confused about during the offer-writing process. Here’s some general info on what closing costs include so that you’ll be ready when the time comes!

What Are Closing Costs?

Closing costs are fees paid when you refinance or transfer ownership in real property. They are paid (usually) by both the buyer and the seller on the settlement date. These fees are highly variable, due to many factors including the property’s purchase price, services needed during the purchase process, utility adjustments and local and state taxes. Generally, closing costs range anywhere from 2% to 5% of a property’s selling price. Talk to your lender before making an offer about closing cost estimates so that you can adjust your offer accordingly!
 
By law, lenders are required to give you a loan estimate within three days of receiving your application. This document sets out what your closing costs will be. These fees, however, are not set in stone. Your lender should provide a closing disclosure statement at least three business days before the closing date which will be a more reliable estimate of your closing costs. Make sure you read and understand this closing disclosure and ask your lender if there are any significant changes from the initial estimate you received!

What’s Included?

Everyone’s closing costs will be different depending on their own transaction so take any “helpful advice” from parents or friends with a grain of salt. Some examples of typical costs include:
  • Credit report fees (the cost of checking your credit record)
  • Loan origination fees (which consists of the cost to your lender for processing your loan)
  • Attorney fees
  • Inspection fees (for inspections requested by either you or the lender)
  • Appraisal fee
  • Survey fee (so that both you and the lender know where your property boundaries lie)
  • Escrow deposit which may cover private mortgage insurance and some property taxes
  • Pest inspection fee
  • Recording fee paid to a county or city authority to file a record of the property transfer and/or new mortgage lien against the property
  • Underwriting fee to cover the cost of processing a loan application
  • Discount points (money you pay your lender to get a lower interest rate)
  • Title insurance (protection for you and the lender should there be any issues with title to the property)
  • Title search fees (costs incurred by the company who checks the title on the property)

Can I Add my Closing Costs to the Loan?

Most loan programs will allow for a percentage of the purchase price to go towards closing costs. You can either ask for a seller credit or a lender credit towards the closing costs. Asking for a seller credit is more appealing to the seller if you offer a higher purchase price–the seller won’t lose any money and you can use the seller credit towards the closing costs. In this scenario, what you’re doing is financing your closing costs over the life of the loan.
 
With a lender credit, you agree to a higher interest rate so that the lender will pay some of the closing costs. You can potentially get a lender credit of $2,000 to $4,000–a nice chunk of change! Keep in mind, however, that you’ll eventually pay more over the life of the loan than if you had just paid upfront!
 

What Can I Expect?

Before the big day, pull together any paperwork and keep it on hand for easy reference. Be prepared to take your time reading through all of the closing documents. Make sure you completely understand all of the terms you’re agreeing to. If some of the terms are missing or incomplete, don’t sign until they’re fixed.
 
Your lender will send money to the closing agent via a wire transfer and may require that you set up a new escrow account with them to pay your property taxes and homeowners insurance together with your monthly mortgage payment. You should be advised before closing day how much money you’ll need to have for closing, but bring your checkbook with you to cover any incidental closing costs.

Keep reading for more about buying your first home:

How Much Money Do I Need To Save To Buy A House?

How Much Money Do I Need To Save To Buy A House?

Exactly how much cash do you need to have on hand when buying a home? We’re going to dive into how much money you really need to save up to afford a house, the hidden expenses you may not have planned for and some tips for how to find your perfect house budget!

read more
Home How-To: Housewarming Parties

Home How-To: Housewarming Parties

The origin of the housewarming party is unclear–some say it’s rooted in the medieval tradition of literally warming the house with the community bringing gifts of firewood, while others say it stems from the idea of lighting a candle on the first night to ward off evil spirits.

read more
Avoiding Common Moving Day Mishaps

Avoiding Common Moving Day Mishaps

Moving is undoubtedly stressful, but the right preparations can make it easier. When picking your moving day, take some time off for the family in the months before or after summer when rates are low. Have some extra buffer time to make sure the adjustment goes smoothly for everyone. When it comes to organization, a good cleanout can make all the difference before it is time to pack. Communicate with your movers about how to handle delicate and valuable items, and make sure everything is clearly labeled to make unpacking the house easier for all.

read more
Is It Time to Take the Next Step? Buying a Home With a Partner

Is It Time to Take the Next Step? Buying a Home With a Partner

First comes love, then comes marriage, then comes...a nice home with room for a carriage? In terms of relationship milestones, buying a home with a partner can be an exciting and life-changing step! How do you know whether buying a home with another person (married or...

read more
Local Love: What Made You Fall In Love with Your Neighborhood?

Local Love: What Made You Fall In Love with Your Neighborhood?

It’s hard to pinpoint exactly what it is about your hometown or favorite neighborhood that really made you fall in love with the place… Was it the charming Main Street or the easy access to awesome shopping? What about the local playground or the incredible library?...

read more
We Know What It Means To Serve

We Know What It Means To Serve

The greater Fredericksburg region is a hotspot for military families and defense contractors! Just a short trip away from the Nation's Capital and only minutes from Quantico MCB, Fort AP Hill and NSF Dahlgren, we are in the perfect spot for those looking to live close...

read more
Is It Time to Take the Next Step? Buying a Home With a Partner

Home Buying 101: The Appraisal

You’ve spent months looking and finally settled on the house of your dreams. The seller even accepted your offer! Congrats! It’s not *quite* time to break out the bubbly yet, though! So many home buyers and sellers have questions about the appraisal process, we wanted...

read more
Open House Weekend – May 19 & 20, 2018

Open House Weekend – May 19 & 20, 2018

Sign in for a chance to win! This coming weekend, we're excited to announce we have 28 homes being held open! Every visitor that signs in to one of our open houses on May 19th or 20th will have a chance to win one of three Amazon smart voice assistants: the Amazon...

read more