So you have set your budget in buying a new home. You have made a good estimate to see if you can well afford the monthly amortizations. The good news is that - yes, you can afford the monthly payments and the down payment is no problem as you have already allocated the cash to defray the cost. However, soon as you win the bid for the house you want to buy, you realize there are more expenses to shoulder before you can truly claim ownership of the house. These expenses cover the closing costs. These costs actually include miscellaneous fees and charges, that, when summed up, can be quite a lot. So as not to be caught unprepared for these expenses, try to estimate closing costs when buying a home. Here are tips to guide you on how to do this:
- Know exactly how you are going to pay your mortgage. If you are availing of certain payment schemes such as paying points to mitigate the rate of interest, these paying points should determine your closing cost. Take note that paying points have equivalent percentage on the amount of your loan, and that these points have commensurate amount to be paid as part of closing cost.
- Take out your calculator and sum up all the other fees incurred in the processing of your mortgage loan. These fees include tax service (as required by your state laws), flood service, document and loan processing fees, remittance or wiring fees (for sending your payments) and certain transaction fees for your agent.
- Estimate the appraisal cost. The financing company from which you are availing your housing loan will charge you with these fees upon closing. Appraisal fees refer to the costs entailed by the mortgage company in conducting assessments on the property to determine its value. Mortgage companies do this in order to ascertain that the value of the property you are buying is higher than the loan amount you are applying for.
- Find out the amount of insurance fee you are due to pay. The insurance agent of the sale is the one who has access to this information. Insurance is needed before you can attain title to the house to ensure your sole ownership of said property. The fees for this service are incorporated in the closing cost.
- Tally all the costs needed for the ocular inspection of the home you are buying. Inspection is one requirement to be complied with before you can buy a home. Again, inspection fees will be added to the closing cost.
- Do not fail to include the legal fees. Attorneys are necessary parties in real property business. They do the notary services as well as make verifications on the legality of the sale.
- Base your estimate on the standard closing costs. On the whole, the total closing costs in real estate sale is roughly between 3 to 5 percent of the total amount of the loan. Hence, if you are availing of a 200 thousand dollar loan, you are likely to pay 6 thousand to 10 thousand dollars as full closing cost.
You cannot really exactly say how much you will spend when buying a home because of the many extra charges on the side. To be truly ready when making a purchase, it will help a lot if you do an estimate of the closing cost before dealing with your real estate agent.