When you’ve finally found the perfect home in Hamilton County, you might think that the hard part is finally over. Unfortunately, you’ve still got to deal with the looming specter of closing costs when you sign your name on your mortgage. Closing costs happen to everyone and everyone buying a home, so you’re not alone – however, that doesn’t mean they’re always easy to understand. Know what you’re getting into with closing costs: an informed homeowner will be able to spot mistakes, sneaky unneeded fees, and bad deals from a mile away.
The Facts on Closing Costs
Closing costs are fees stacked on top of your new home’s purchase price, and can encompass a variety of charges. They range from the more basic paperwork processing fees, to charges for home and credit background reports, title transfers, insurance, and more. They add up quickly, and generally, a buyer will wind up paying an extra $3,500 or more on top of what they’re already putting down for their new home.
The U.S. Department of Housing and Urban Development orders that all home closing costs be laid out by a lender on a form called the HUD-1 Settlement Statement. You’re not only permitted by law to review the statement up to 24 hours before the signing date, but are also permitted to request a Good Faith Estimate (GFE) from any prospective lender on what they expect to charge you. Moreover, this GFE is legally relevant: if the GFE and the HUD-1 are any more than 10% different, the lender has to cap the costs at that number – no matter how far it goes over. This allows you to compare offers that different lenders present you on your mortgage, and pick the ones that work the best with your needs. Remember, loans are a business transaction: if a lender doesn’t present you with a competitive, fair deal, you can and should walk away from the transaction. Don’t be afraid to ask line-by-line questions on each fee, and have your lender explain in detail the charge and its legal necessity. An investment in an attorney with experience in real estate law can often be a great benefit, as their specialized knowledge can prevent you from paying more than is necessary.
How to Avoid or Negotiate Closing Costs
Can closing costs be avoided altogether? It’s not unknown for banks and other mortgage lending agencies to offer closing cost-free options; however, you’ll almost certainly wind up paying those closing costs regardless in other ways. Some agencies will charge a higher interest rate on closing cost-free mortgage loans, and some will simply fold the closing costs into the loan itself; meaning you’ll wind up paying interest on them.
If you can come to an arrangement with your home’s seller, they may agree to take responsibility for some of the costs. Commonly, sellers can be convinced to cover inspection, survey, and appraisal fees, and fees for any background checks on the home that were run. Remember, they want you to buy their home, and you’re just a few small signatures away from doing so – picking up a few fees is often a small price to pay in a seller’s eyes, no pun intended.
Remember, you don’t have to go it alone when it comes to home closing costs. An experienced real estate attorney is a solid investment, and will give you the expert advice and negotiating power you need to get the best deal on your home. When it comes to selling your old home, ask a drab to fab real estate agent for advice and how-tos on getting your home ready and up to speed, so no closing costs wind up bouncing back into your lap. Shop smart, save cash where you can, and you’ll be on your way to a long and happy life in your new Hamilton County home.