There are more factors involved in buying a home in Champaign County than just paying the down payment. You will also have to pay closing costs. Closing costs are fees you pay to a mortgage lender for services they provide.
Champaign-Urbana Homebuyers who are less experienced have a tough time estimating closing costs or they don’t expect this expense at all. A closing cost is a fee you pay your lender for creating your loan. The fee may cover the appraisal and title search for your home.
How Much Are Closing Costs?
Depending on the price of your home, closing costs can range from 3% to 6%. For a mortgage of $200,000, your closing costs could be $6,000 to $12,000. This cost does not include your down payment.
There is always the possibility of negotiating with the seller to pay some or all of your closing costs. Both the buyer and seller are responsible for paying closing costs, but usually, the buyer pays the most. An offer to cover the costs by a seller is called a seller concession.
The seller, if they agree to this concession, can contribute only a certain amount based on the type of loan, down payment, and occupancy.
Types of Fees
An itemized breakdown of all the closing costs you will be responsible for should be included in your loan estimate and closing disclosure. Some of the items you might see include:
- A mortgage application fee is charged by your lender to process your mortgage application.
- Attorney fees cover the cost of having real estate contracts and agreements prepared and reviewed by an attorney.
- The party handling the closing is paid the closing fees, which are also known as escrow fees.
- In FHA loans, an upfront mortgage premium or UPMIP of 1.75 percent of the base amount of a loan must be paid at closing, or it can be rolled into your loan.
- When you buy a property that’s part of a homeowners association, you may have to pay a transfer fee that covers the costs of switching ownership
- In most cases, your lender will require that you prepay your first year of homeowners insurance at the closing.
- The origination fee covers the lender’s administration costs.
- Private mortgage insurance, or PMI, may be required if your down payment is less than 20%.
- During closing, you’ll pay any pro-rata property taxes that are due from the date you close to the end of the tax year.
These aren’t the only closing costs, but they’re some of the more significant ones.
Can You Lower Your Closing Costs?
Closing costs aren’t all within your control, but there are things you can do in order to lower them.
A great way to save on closing costs is to shop around for a mortgage company before making a decision. It’s important to pick a lender that offers the most competitive terms overall because closing costs will vary from lender to lender.
Finally, you might also negotiate with the seller to have them contribute, especially if you’re in a buyer’s market.
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