Ah, the dreaded closing costs — the one thing no one likes to talk about when it comes to selling and buying a home. Closing costs are certainly not the most fun or exciting thing to talk about when it comes to real estate, but in the present housing market, it’s an essential piece of the process.
Here in this article, we highlight what you need to know when it comes to these closing costs, covering who pays what. Different parties tend to pay specific parts of the closing costs. So no matter if you are buying a home or selling, you need to know what you should anticipate on paying.
Closing Costs for Sellers
Traditionally speaking, the sellers tend to pay the commission while the homebuyers cover more line-item expenses in relation to the selling and purchasing of the home.
While closing costs can vary by location, homebuyers traditionally should expect to pay anywhere from 2 to 5 percent of the purchase price of the home in closing costs fees.The home sellers meanwhile, should expect to pay 5 to 10 perfect of the purchase price of the home in closing costs fees.
The sellers pay the biggest portion of the closing costs because they typically pay the commission of the sale. Since this is based upon a percentage of the total sale price of the home, it can be a big number. Additionally, sellers will have to pay the balance that remains on property taxes and any homeowners association dues that might remain as well. The homeowners’ association dues would be based on a pro-rated amount.
Closing Costs for Homebuyers
As mentioned above, the homebuyer is responsible for individual line-item expenses that are smaller, but that can add up quickly. These costs can vary from home to home since each house has unique features that can affect certain categories and line-items.
For example, homebuyers should anticipate paying for the following:
- 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
If you are buying the home, you will want to be sure to meet with your mortgage professional to go through these individual line-items one by one. Homebuyers will want to understand how they will affect your mortgage.
At some point during the sale process, the homebuyers should receive a loan estimate that lays out all of the estimated costs that the buyer will face when purchasing the home. This helps to decrease the number of surprises when it comes to closing on the home. Sometimes, buyers then use this information to shop around for different lenders to find the best rates and costs.