If you are planning to buy a home, it is likely that you are considering your financing options, as approximately 80% of homebuyers financed their home purchases in 2022. Mortgages can be complex, and one of the expenses to consider is closing costs. By understanding these fees, you can negotiate a better deal with your lender.
What Are Closing Costs?
Closing costs are the expenses associated with the purchase of a home that are incurred by the buyer and seller. These costs can vary widely depending on where you live, the price of the home, and the terms of the sale. Some common closing costs include:
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- Lender fees: These are fees charged by the lender to process the loan application, such as an application fee, origination fee, and underwriting fee.
- Title insurance: This insurance protects the lender and the buyer against any disputes over the ownership of the property.
- Escrow fees: These are fees charged by the escrow company to handle the closing process, including the transfer of money and documents.
- Home inspection: If you choose to have a home inspection, you will need to pay for the inspector’s services.
- Appraisal: An appraisal is an estimate of the value of the property, which the lender will use to determine how much to lend.
- Property taxes: Depending on the timing of the sale, you may need to pay a portion of the property taxes for the year.
- Homeowners insurance: You will need to purchase homeowners insurance to protect your new home.
- Other fees: There may be other fees associated with the purchase of a home, such as a land surveying fee or a fee to record the deed.
How Much Can You Expect to Pay in Closing Costs?
Closing costs are usually based on the loan amount. They don’t include your down payment. Typical closing costs for a home sale are 2 to 6 percent of the loan amount.
Average closing costs vary by state. In general, Missouri has lower closing costs than many other states. Your real estate agent can help estimate what your closing costs will be.
The Closing Cost Process
The law requires lenders to disclose your closing costs before you complete the home purchase. You must receive this closing disclosure at least three days prior to closing. The closing disclosure specifies the final terms and closing costs for your mortgage.
Buyers usually pay most of the closing costs. The seller may also pay some of the buyer’s costs.
Sellers concessions are more likely in a buyer’s market, though. The seller may offer to pay the closing costs to encourage a potential buyer to make the sale.
The sellers market conditions in St. Louis are slowing, but you may still have trouble convincing a seller to help pay closing costs. Your real estate agent can advise you whether you could benefit from negotiating with the seller.
How to Pay Closing Costs
You’ll need to pay your closing costs on the day you finalize your home purchase. You’ll also need to pay your down payment. You can pay the closing costs with a cashier’s check if you have enough money set aside.
You may be able to roll the closing costs into your loan. You won’t need additional money at closing. However, the amount of your mortgage and your monthly payments will increase.
Reducing Your Closing Costs
You can avoid paying more than necessary on closing costs. Comparing mortgage estimates from more than one lender can help you find the lowest fees. You can negotiate costs like loan origination fees.
The timing matters when you buy a home. Closing the sale near the end of the month can save you money. If you close a loan in the middle of the month, per diem charges will accumulate before your first mortgage payment is due. You can reduce per diem interest by closing the deal at the end of the month.
Some lenders offer discounts on closing costs. These discounts may apply to veterans, union members, or first-time home buyers.
Preparing for Your Home Sale Transaction in St. Louis
Closing costs are one part of your St. Louis real estate transaction. The amount you’ll pay depends on the amount of your mortgage for the home sale. Your real estate agent can help you understand and prepare for these costs.
The Sarah Bernard Realty Team is ready to be your partner when you’re ready to buy a home. Our experienced team is dedicated to your best interests. We’ll help you meet your real estate goals.
Contact the Sarah Bernard Realty Team today to discuss St. Louis or St. Charles real estate opportunities. We look forward to working with you!