The Truth About Closing Costs
Home buying and selling is rarely a straightforward process.
After hiring a real estate agency, listing the house and negotiating, you still face hidden expenses like closing costs. Closing costs are the fees associated with home purchase when your property is transferred from the seller to buyer.
These expenses range from taxes and processing fees to agent commissions and home preparation, and they can cost anywhere from $10,000 to $60,000 depending on a variety of different factors.
When calculating closing costs, lender’s fees, personnel that needs to be present during closing, legal documents, and the activities that need to be carried out as part of the closing process all determine how much your closing costs will amount to.
Documents such as closing disclosures, deeds of trust and mortgage notes may come at an extra cost as well. Sellers typically have only a few closing costs to worry about with the largest cost being the real estate agent’s commission.
You can usually determine the estimated closing costs when selling with online cost calculators like the Zillow Sales Proceeds Calculator. These cost calculators will factor in the sales price, mortgage balance, the agent’s commission and other common expenses such as home preparation.
All buyers face immediate fees like homeowners association dues and property or transfer taxes, but most buyers also face closing costs associated with getting a loan. These costs include appraisal fees, prepaid interest, bank processing fees, title insurance and even more. While the third party costs like taxes and processing fees are typically unchanging, there are other lender costs like loan origination fees, application fees, and commitment fees that are negotiable for the buyer. Some costs such as the application fee can be waived, while others such as origination fees can be adjusted downwards based on the dollar amount and interest rate.
Closing costs vary by state but typically lie at about 2-5% of the purchase price of the home. For example, in California, a typical $200,000 mortgage with a 20% down-payment would incur closing costs of about $5600 on average. National closing cost rates for the same mortgage range from $4000-$7500.
Home buyers and sellers can prepare for closing costs as soon as they receive the terms of their mortgage from the lender. Typical mortgage laws require lenders to provide closing costs to applicants along with the terms of a loan estimate.
Lenders can also provide closing fees through a closing disclosure statement that is required to be issued at least 3 days before closing.
For more on this subject read our recent blog, “3 Questions To Ask Before Hiring an Agent”
Thinking of buying or selling a home in the La Jolla area? As consistent top producers in real estate, Linda Daniels and The Daniels Group are your La Jolla housing specialists. Our team of local experts will ensure that you have a successful real estate transaction. Call us today at (858) 361-5561 or email us anytime by clicking here.