Most homeowners have tunnel vision on a loan’s down payment and interest rate above all the other factors. This can make them commit to loan terms that aren’t always the best option for their financial situation. Besides these two variables, it’s important to pay extra attention to a loan’s closing costs. Having a better understanding of these additional fees will make you more knowledgeable when shopping for a new loan.
What’s the Deal with Closing Costs?
Closing costs are fees imposed on you as you take out a mortgage and will typically range around 3-6 percent of the loan’s amount. You’ll have to pay them at closing when the property is transferred from property owner to homebuyer. Additionally, the property owner may pay for an amount to accommodate a real estate agent’s commission.
Closing costs aren’t always an immediate concern for homeowners, especially for those who want to stick to one mortgage plan until the end. However, these fees will start adding up and making more impact on your real estate investments if you’re selling your property or refinancing your mortgage. Since these two financial strategies can save you a lot of money in the long run, you’ll need to be more conscious of how it affects your loan options.
How Much Are Closing Costs?
Computing for closing costs can be tricky, especially since property owners have different contracts and fees to account for. Listed below are some payments that could be included in your closing fees:
- Appraisal Costs: A typical appraisal fee costs around 200-500 dollars, depending on the contractor you choose to hire. Like most items on this list, these fees may be included in your closing costs or application fee. Be sure to identify that it’s in one or the other and not in both.
- Escrow Costs: The service for paying for property taxes is mandatory and something you’ll shoulder moving forward as the new property owner.
- Notary Costs: Notarizing your signed documents is necessary to ensure their authenticity. Thankfully, notaries tend to just offer a flat fee for a set number of documents.
- Determination Costs: Every property can be prone to a specific natural hazard, like floods or earthquakes. For this reason, a property owner needs to notify their buyers if the property needs to avail of specific insurance policies. While the home buyers cover the insurance policies themselves, the process of determining the risks a property needs to prepare for is included in the closing costs.
With these fees in mind, remember that different properties will have varying authoritative bodies to address. For example, gated communities or condominium units may need to account for additional homeowners fees that the buyer will cover moving forward. These values tend to pile up and may even be separate from your closing costs’ computation. For this reason, it’s important to get a quotation of all the additional expenses you’ll have to pay before buying a home.
Conclusion
Being more familiar with the fees and expenses attributed to the real estate market will always help you be a better homebuyer. As a consumer, it’s your responsibility to study these topics to make better decisions with your purchases. If you work with the right mortgage company, you’ll typically get a transparent overview of all these costs to give you peace of mind on your investments.
At paloRATE, it’s our mission to deliver honesty, integrity, and competence to our customers. This is why we pledge to help borrowers overcome financial roadblocks when securing a loan. If you’re looking for the best mortgage refinance rates in Washington, contact us today at (206) 719-269!
