As you prepare to buy a home, you might be wondering, “What are closing costs?”. It’s an important question because understanding these costs can help you plan better and avoid any surprises at the end of your home-buying journey. At Edge Mortgage Inc. we know that going through the home loan process can feel confusing and overwhelming at times. While we strive to make the process as quick and easy as possible, we also think it’s helpful for you to be informed. Knowing the steps and what to expect is a huge part of helping you feel at ease.
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What Are Closing Costs?
So, what are closing costs? In simple terms, closing costs are the fees and expenses you pay when you close on your home. These costs cover various services and paperwork needed to finalize your mortgage and transfer ownership of the property. Knowing what these costs are and how much you might need to pay can help you budget more effectively. Let’s dive in and further break down what closing costs are and why they’re a crucial part of buying a home.
Common Closing Costs
Closing costs aren’t just made up of one or two things. There are several common closing costs that you should be aware of:
Loan Origination Fees
These fees are charged by your lender for processing your mortgage application. They typically range from 0.5% to 1% of the loan amount.
Appraisal Fees
An appraisal is needed to determine the value of the property. This fee usually ranges from $300 to $500.
Title Insurance
Title insurance protects you and your lender from any legal issues related to the ownership of the property. The cost can vary but is generally around 0.5% to 1% of the loan amount.
Attorney Fees
If you have an attorney involved in the closing process, there will be fees associated with their services. These can vary widely based on the attorney and the complexity of the transaction.
Home Inspection Fees
A home inspection is essential to ensure there are no hidden issues with the property. This typically costs between $300 and $500.
Property Taxes and Insurance
At closing, you may need to pay property taxes and homeowners insurance upfront. The amount will depend on your local tax rates and the insurance policy you choose.
Recording Fees
Finally, these are fees charged by your local government to record the sale of the property. They can range from $50 to several hundred dollars.
Who Pays Closing Costs?
Buyer’s Responsibility
As the buyer, you’ll typically be responsible for most of the closing costs. This includes the loan origination fee, appraisal fee, home inspection fee, and title insurance.
Seller’s Responsibility
The seller usually covers costs like real estate agent commissions and may contribute to some of the closing costs as part of the negotiation.
Negotiable Costs
Some closing costs are negotiable. For example, you can ask the seller to pay for certain fees as part of your offer. It’s always worth negotiating to see if you can reduce your out-of-pocket expenses.
How to Estimate Closing Costs
Using a Closing Cost Calculator
An online closing cost calculator can help you get an estimate of what you might need to pay. These tools take into account various factors like your loan amount, location, and type of loan.
Good Faith Estimate (GFE)
Your lender will provide you with a Good Faith Estimate (GFE) early in the application process. This document outlines the estimated closing costs and helps you understand what to expect.
Loan Estimate
A Loan Estimate is another document provided by your lender, giving you a detailed breakdown of the closing costs associated with your loan. It’s important to review this carefully to understand all the fees involved.
Reducing Closing Costs
Shopping Around for Services
You can shop around for some services, like home inspections and title insurance, to find the best rates, so this can help you save money on your closing costs. Additionally, it’s important you you know that you have a choice and you don’t have to go with the place that’s given to you.
Negotiating with the Seller
You can also negotiate with the seller to cover some of the closing costs. This is often done as part of the offer and negotiation process.
Closing Cost Assistance Programs
There are programs available that offer assistance with closing costs, especially for first-time homebuyers. It’s worth exploring these options to see if you qualify for any help.
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Understanding what closing costs are and how they affect your home-buying process is crucial. By knowing what to expect, you can plan better and avoid any last-minute surprises. If you have any questions or need personalized advice, don’t hesitate to reach out. At Edge Mortgage Inc., we’re here to help you navigate the home-buying journey, whether you’re in Colorado, Wyoming, Nebraska, or Ohio.
It’s also important to know all the fees that go into your mortgage payment. Not only can we help you understand closing costs, but also your mortgage payment fees. Ready to learn more about what closing costs are and how to manage them? Contact us today for personalized advice and assistance. We’re here to help you every step of the way!
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“Keri was amazing helping us every step of the way purchasing our first home. We had no idea where to start or what type of loan to consider. She was very quick to answer us with our busy work schedule all times of the day! I highly recommend Keri and her team.” -Angie
“I had an absolute joy of a time working with Keri and Edge Mortgage to purchase my house. It was our first time and we had a unique purchase with two families going in on it. Keri was always there ready to answer any questions we had from easily “Google-able” to uniquely one-off. She was always so excited to talk to us. She made us honestly feel like we were her only client, she never had to ask a question more than once and was always aware of where we were in the process. I was honestly blown away by the dedication to serving us. I am 100% certain we wouldn’t have gotten anywhere near as VIP service from a big box broker/lender. Thanks to Keri we’re home owners who know haven’t had a surprise yet! Great, GREAT work done over there at Edge. 10/10 would recommend.” -Sinjhen
Edge Mortgage Inc. is your trusted mortgage broker serving Colorado, Nebraska, Ohio, and Wyoming
Edge Mortgage Inc. is located in Johnstown, Colorado, and serves all of Ohio, Colorado, Wyoming, and Nebraska. We offer honest answers and a stress-free process and we have no hidden or extra fees, keeping more money in your pocket. We are your trusted mortgage broker and we are ready to serve you. Call us today at 970-744-0000.
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