What are closing
costs?
Closing costs
are the fees for services, taxes or special interest charges that surround the
purchase of a home. They include upfront loan points, title insurance, escrow
or closing day charges, document fees, prepaid interest and property taxes.
Unless, these charges are rolled into the loan, they must be paid when the home
is closed.
How can I save
on closing costs?
Studies show
that the closing costs, which can average 2 to 3 percent of a total home
purchase price, are often more costly than many buyers expect. But there are
some ways to save:
* Negotiate with
the seller to pay all or part of the closing costs. The lender must agree to
this as well as the seller.
* Get a no-point
loan. The trade-off is a higher interest rate on the loan and many of these
loans have prepayment penalties. But buyers who are short on cash and can
qualify for a higher interest rate may find a no-point loan will significantly
cut their closing costs.
* Get a no-fee
loan. Usually, though, these fees are wrapped into a higher interest rate
though it will save you on the amount of cash you need upfront. * Get seller
financing. This kind of arrangement usually does not entail traditional loan
fees or charges.
* Rent the
property in which you are interested with an option to buy. That will give you
more time to save for the upfront cash needed for the actual purchase.
* Shop around
for the best loan deal. Each direct lender and each mortgage brokerage has
their own fee structure. Call around before submitting your final loan
application.
Who pays the
closing costs?
Closing costs
are either paid by the home seller or home buyer. It often depends on local
custom and what the buyer or seller negotiates.
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