Everyone knows when purchasing in a home, the purchase price is the main negotiating point with the seller. However, many first time buyers especially, will be shocked with they learn the purchase price is just the start to the costs they will need to cover to actually CLOSE the deal. These costs are referred to as CLOSING COSTS.
A typical CLOSING COST will range from 2% - 5% of the purchase price of the home and a buyer needs to understand that this cost will be their responsibility at the closing table and is not a part of the purchase price. CLOSING COSTS are the fees paid at the closing of the transaction that covers the cost of services provided to the buyer and seller. These fees based on which side of the transaction is being covered can vary from state to state and transaction to transaction. CLOSING COSTS are also a fee to either a buyer or seller that are different from a lenders fee or origination fees.
Buyer and sellers will in some cases, use CLOSING COSTS as a negotiating point while they are working on putting a deal together. Buyers may ask the seller to contribute to their closing costs and typically the buyer may ask for 3-6% depending on the loan type they are working with. However, a buyer needs to know that a seller does not have to cover these costs or even agree to pay any of the requested fees.
CLOSING COSTS are different than the earnest monies a buyer will be required to pay to the listing agent’s brokerage at the time of offer. The earnest money will be applied to the purchase price on the HUD at the closing table, but will not cover any of the fees the buyer and/or seller pays to take ownership.
If you do acquire CLOSING COSTS to complete your transaction, you should take the time to discuss with your lender what your options of payment types there are. Most lenders will tell you that if at all possible, it would be wise to come to the closing table with the cash to pay those fees versus rolling them into the loan. Again, be sure you discuss these options with your lender.
So when you start to consider purchasing a home, make sure you understand all the fees and costs that will be involved in the transaction and at what different points these fees will be require of the buyer or seller to pay those fees.