Closing costs sometimes take new home buyers by surprise. They assume they'll need to pay the down payment and make their monthly payments, and that's it. However, though the exact amount that needs to be paid varies with every transaction, buyers can also face significant additional costs at closing.
To help you better understand what you will need to pay and why, here are a few examples:
- Paying for the credit check. Your lender has to check one last time to see if you will qualify for the loan.
- Paying the escrow fees. Many times, buyers and sellers will divide these costs in half, but that still means you have to pay 50 percent.
- Paying for title insurance. Without this, some lenders may not be willing to give you the loan.
- Paying a fee for document preparation. If you have never bought a home before, you may be very surprised by the sheer amount of paperwork that is included. You'll have to go through it when you close, signing on the dotted line time and time again.
- Paying additional miscellaneous fees. The costs can vary significantly here. For instance, perhaps a courier had to be paid for bringing your paperwork to the office. Perhaps the wire transfer of your money cost a fee. In many cases, you will be on the hook for a few hundred extra dollars to cover all of these little costs.
In the grand scheme of things, these closing costs are nothing compared to the overall price of buying a home. However, they still have an impact if they catch you by surprise. Make sure you understand everything about the legal closing process, including the steps you'll need to take and the money you have to bring to the closing.
Source: How Stuff Works, "6 Tips on the Real Estate Closing Process," accessed April 26, 2018