What Are My Closing Costs When I Buy A Home?

BOTTOM LINE - WHAT IS IT GOING TO COST TO BUY A HOME?

First and foremost- you do not pay the agent. The seller pays the brokerage fees.

Secondly, Down payment is different and completely separate from your "CLOSING COSTS". For example on FHA (most typical first time home buyer loan program of choice)...you (buyer) will be required to bring a minimum of 3.5 % of the sales price to closing as your down payment.


Now a buyer, who is financing the purchase by obtaining a mortgage loan, will have typical loan origination fees, escrows and closing fees better known as "Closing Costs." These should typically be 3% of the sales price (unless you are buying a home with high taxes)...if you find your closing costs are disproportionate...that may be a red flag that you are getting ripped off. Take note- It is to your advantage to get a Good Faith Estimate from SEVERAL mortgage lenders and let it be known to them that they are competing with the next guy. In fact, give them the Good faith estimate from their competitor to BEAT. Back to the topic, these closing costs will consist of loan origination fees, tax escrows, tax perorations, title insurance, home owners insurance, recording fee, closing fee & appraisal fee. So if you are following me, on a home purchase of $100,000, you will need $3500 down payment and you should expect to pay about $3000 in buyer closing costs.



This brings me to Seller Concessions. This is when you ask in your offer for the SELLER to pay your closing costs ....it is also termed seller concessions. This allows you to bring less money out of pocket to closing. But keep in mind, this expense is coming off of the seller's bottom line price. If you offer $100,000 and ask the seller to pay the maximum of 6% seller concessions that actually translates to only $94,000 on paper. That is before they foot the bill for the brokerage fees, transfer taxes and on and on.



This is important to remember when you find yourself in a tight negotiation situation like bank foreclosures that have multiple, competing offers. If you want the seller to pay your closing costs, in some markets, you have to inflate the asking price and put the closing costs on top. Ex. Hot property asking $100,000. You want seller to pay 6%. You offer them $106,000 with seller paying $6,000 in buyer closing costs. JUST MAKE SURE THE PROPERTY WILL APPRAISE!