Buying a house entails a lot of added costs other than the mortgage that you will pay monthly. One of the costs that are often forgotten by first-time buyers are the closing costs. Knowing what the closing costs are and negotiating with the owner of the property about who will pay for what part of it can save you a lot of headache in the future. Sometimes not knowing about closing costs can take you by surprise. If you’re working around a budget, requiring a big amount out of pocket can upset your budget in a big way.
Many people who overlook closing costs when buying real estate don’t understand that closing costs are part and parcel of real estate ownership when it approaches the final stages of the purchase. Closing costs is a general term for several fees that need to be covered including taxes, an amount placed in escrow, title insurance fees, lender’s inspection fees, loan origination fees, transfer taxes and a lot more. There are a lot of fees involved during the process of transferring a property from one owner to another. In order for you not to be taken off guard by all these fees, it’s important that you know exactly which ones you should expect.
For example, if you buy Fountain Hills real estate and are paying for part of the amount through a loan, the closing cost would include loan origination fees. This is usually 1% of the amount you will borrow and it’s used for the administrative costs that come with processing your loan. You can prepare for this by estimating the cost based on the price of the property you want to buy. Say for example you’re looking at Fountain Hills homes for sale and see the usual price range of properties in the area you are eying, you’ll know more or less how much you need to prepare for the loan origination fees. For example, $5000 for a $500,000 property. This is typically the biggest fee you will encounter with the closing costs.
Lenders would also often require a professional to look at the house you are planning to buy and assess the value of the property. Because of this, you’d most likely also need to pay for the appraisal fee. Basically what the appraiser would do is to determine if the price you (as the buyer) offered to the seller is justified based on the current value of the properties around the same location, as well as other factors.
There are some closing fees that may be split between the buyer and the seller if they agree on it. An escrow is a third party used to hold the money and papers concerned with the property during the transaction. Once the transaction is finished or closed, then the property and papers will be released from escrow. Since it’s in the interest of both parties, it’s only reasonable to ask that the seller also participate in paying the escrow fees.