This is an incredible time for buying a home and one of the most affordable we may ever see but unless you are realistically prepared for the associated real estate closing costs buying your dream home can turn into a nightmare…
Knowing what your real estate closing costs will be before going in or at least have a solid idea of what they will be is essential. Pin pointing this without extensive experience of buying and selling real estate or getting pre-qualified for a home loan can be difficult as they can vary so widely. Real estate closing costs for buying a home can be anywhere within the region of 2-6% of the property’s purchase price depending on a variety of factors, including the state in which you are buying. Generally the cheaper the home, the higher the percentage due to fixed costs which remain the same for all transactions.
So get pre-qualified for a mortgage loan early and make sure you understand all of the closing fees involved. A good loan officer won’t have a problem repeating themselves until you get it and will want you to fully understand everything.
However, it is also important to understand how real estate closing costs can change from the time of original quotes to the actual closing. Remember an estimate is just an estimate and some lenders will low ball on Good Faith Estimates in order to make their offer appear more appetizing, especially when it comes to third party fees like title and home owner’s insurance. So make sure you are comparing ‘apples-to-apples’ when shopping for a home loan too.
As with most other things in life buying a home often ends up being more expensive than most imagine, even though it still definitely beats renting for most right now. So always have extra liquid cash available so you aren’t caught off guard, know what additional expenses could crop up like flood insurance, homeowners’ association fees, mortgage insurance (and utility deposits) and find out how you can roll some of these into your loan if you are tight on cash.
Then make sure you receive a copy of the final HUD 1 settlement statement in advance and have time to quiz your mortgage broker, real estate agent or title company about unexpected costs prior to being on the spot and having to sign.
