In fact, depending on the mortgage loan amount of the purchase/sale price, it’s not hard to ballpark either side’s closing costs. Before you get too far along in the process, ask your mortgage professional for an estimate.
Precisely what do Sellers and buyers Pay in Closing Costs?
After you have a real, live deal with a closing date, you should be in a position to know your costs pretty close to the penny. If you’re a new comer to real estate or haven’t bought or sold in some time, here’s what you need to learn about settlement costs.
Buyers have a higher amount of costs
In a closing, both buyers and sellers have costs. Usually, the buyer is faced with more line-item expenses than the seller (although sellers pay more). For starters, most buyers are getting loans to make the purchase, and many of the charges stem from the financing.
A buyer should be given a loan estimate form early on in the sale process. This document details all the approximate costs the purchaser will face when making the purchase, so there aren’t any surprises at closing. Some buyers utilize the information on the loan estimate form to shop for different lenders, interest rates and charges.
Typically, buyers obtaining a loan will see some of the following costs:
Appraisal fee
Origination fee
Prepaid interest
Prepaid insurance
Flood certification fee
Tax servicing fee
Credit report fee
Bank processing fee
Recording fee
Notary fee
Title insurance
Be sure to go through these fees line by line together with your mortgage professional to comprehend exactly what they are and just how they apply to your loan.
Aside from the expenses of getting that loan or purchasing a home, some expenses, including property taxes or homeowners association dues, are pro-rated and paid at the time of closing. For example, if you’re buying a home and you close toward the end of the property tax period, you’ll likely need to pay the balance of taxes upfront.
The same holds true for prepaid loan interest. When you close toward the end of the month, the lender may ask for the first month’s payment in advance.
Negotiate sharing some of the costs
Coming up with an extra 1 or 2 percent toward settlement costs can be a bigger deal when compared to a $5,000 decrease in the purchase price, so ask the owner to pick up some of the closing costs as part of the negotiation.
Credit for $5,000 to go toward closing costs will certainly be a much greater bang for the buyer’s buck. The purchase price reduction won’t add up to much more than a few dollars each month over the length of the mortgage loan. But saving $5,000 at the closing will be money right back in the buyer’s pocket.
Sellers pay for the commission
For sellers, there will always be fewer line items on an estimated closing statement. However the seller generally bears the biggest brunt of the fees: the real estate commission.
The commission will be based upon a percentage of the total selling price, so it tends to be the largest fee. In addition to the real estate commission, sellers may have to pay the balance of their property taxes, if they haven’t done this already, together with any prorated homeowners association dues.