Why are there Buyers Closing Costs
Many home buyers want to know why there are buyers closing costs! Isn't buying
the house enough money to put out? Why do you now have to come up with closing costs?These are very good questions and when you understand what is involved it will make since why there are these buyers closing costs.
First of all, when you buy a home, you are usually applying for a mortgage. That is unless you have cash to pay for the home. Since most people do not have the quantity of cash necessary to buy the home they have to borrow it. So most of the closing costs that the buyer has to pay are mortgage closing costs.
Basic Mortgage Closing Costs
Loan origination (these are usually 1% of the mortgage)
Discount points (this is the amount you pay to buy down your interest rate)
Title search (you want to make sure you have a free and clear title to the property you want to buy, otherwise there may be a question of your ownership at some time in the future)
Title insurance
Appraisal
Credit report
Recording fees (this fee is usually required by your local government)
Prepaid interest on your mortgage (interest starts at closing, but your payment may not be due for a month, so the interest that will accrue from closing until your first payment is collected)
Private mortgage insurance premium
Property taxes (depending on when close, the seller may have already paid the property taxes, thus you have to pay the portion from the date of closing to when the next tax is due to the seller)
When you look at this typical list, you can see that these would be costs that you the buyer would have to pay. These are just costs that normally come because of the mortgage. Remember this is just a basic list. There could be other fees besides the ones listed here.
Of course there is a down payment you will have to have also. Buyers closing costs are fees you pay in addition to the down payment. So do not be surprised when you find out you have home loan closing costs to pay. But do not let those costs scare you. This part of buying a home.
If you are not prepared to pay these costs, some can be negotiated. But others are fixed so you cannot change them. Some loan programs will allow the seller to help with some of the buyers closing costs. So make sure you find out if your loan program allows for this. Then you have to get the seller to agree!
Another thing you can do is negotiate a lower origination fee. Although sometimes the lender will ask for a higher interest rate to accomplish this. So take a close look to see if it is worth it if the lender counters with a higher interest rate.
Also pay attention to those miscellaneous fees on the good faith estimate. Sometimes unnecessary closing costs are hidden there. These fees should be explained to you. Watch for fees that sound similar.
All in all, most of these buyers closing costs are necessary to close on your mortgage. So do your homework and soon you will be decorating your own home.
Why are there Buyers Closing Costs
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