Buying a new home is one of the most exciting events in your life, but the enormity of it all can be daunting. You’ve got to set your price range. Then you need to research your new neighborhood. And before you move, all your belongings will have to be packed into boxes.
With everything going on, it’s easy to forget about closing costs—a catch-all term for the fees and services that come with home buying. It’s an understandable oversight, but depending on where you live, the closing costs can add up to 2%–5% of the home’s total cost. That’s thousands of dollars! Make sure closing costs don’t take you by surprise by reviewing the most common closing costs and a few ways to limit them.
Common Closing Costs
The names lenders use for different closing costs vary greatly, so don’t be afraid to ask questions if you’re not sure what something is. Knowing exactly what you’re paying for is important so you can truly compare loan offers.
How Can I Limit Closing Costs?
When you ask for a loan, you’ll get a good faith estimate of how much that loan will actually cost you. In addition to interest rates and lending terms, this report will also include a line item report of all the expenses you’ll be responsible for when the sale closes. It’s a good idea to compare all of these factors to understand the true cost of the loan. Note that these numbers are not final and that they can change. Three days before closing, the lender will update the estimate with more accurate figures.
Some lenders promote “zero closing cost” mortgages. As the name implies, these offers roll closing costs into the mortgage, which drastically reduces the cash you need to close a sale. But keep in mind, you will pay for the closing costs eventually, and zero closing cost loans often come with higher interest rates. That means you can end up paying more over time compared to a conventional mortgage that has closing costs associated with it.
An important thing to remember is that all the closing costs will be outlined in the good faith estimate, and there are resources to help ease your financial burden. If you have any more questions, please do not hesitate to give us a call!
Interested In Obtaining Mortgage Pre-Approval?
Here at GTG Financial, we encourage each of our clients to to have an initial mortgage planning discussion surrounding your current situation, goals/budget, and timeline. There are so many additional factors that go into qualifying for a home loan today, it’s important that you are working with a professional that understands the ins and outs of the process and current market trends.
To get started, please click Apply Now.