What are Closing Costs?

by | Jan 29, 2017 | Real Estate | 0 comments

Upcoming Free (& non-promotional) Home Buyer Classes:

February 2nd , from 5pm-8pm (ish)
    Marshall Community Center, conference room
1009 E. McLoughlin Blvd, Vancouver WA (kitty corner from Clark College)

Saturday February 4th, 2017 , from 9am-12pm (ish)
Marshall Community Center, conference room
1009 E. McLoughlin Blvd, Vancouver WA (kitty corner from Clark College)Saturday, February 18th, from 11am – 2pm (ish)
       Vancouver YMCA, conference room
        11324 NE 51st Circle, Vancouver WA (corner of SR500 & Gher Road/112th Ave)
If these class dates and/or times don’t work for you, please let us know.  We understand that you have lives, and families, and work.  We will work something out that works better with your schedule.  Just let us know….
….we also have home seller classes available too…link on left on website

Remember…with reservation…we will throw in lunch, or dinner!  😀

…and happy Sunday to you!  I hope you are having a wonderful day today.  It’s family day…I love family day!  Last week was my husband’s birthday, and while I ‘meant’ to get this out to you, we both know it didn’t happen.  However, I am determined to get this out on time this week.  🙂

One thing we get asked a lot about is Closing Costs.  It’s an important part of the home buying (or selling) process, but no one really knows what they are, are often how much they’re going to be….and why is that?  Well, first you need to know that there are 28 people involved in the purchase/sale of a home.  You will most likely only ever see four of them…. your lender, your agent, your inspector, and your title officer at the end.  Everyone has a job to do in the transfer of the property from the seller to the buyer….and everyone needs to get paid.  Your buyers agent is free to the buyer (don’t get caught by ‘buyers agency fees’ as those are not common), but that may be the only free thing you get.  Seriously… you don’t have to pay for a buyers agent!  There is your good news.  😀

So this week we are going to talk about those CLOSING COSTS!  Lots of people talk about closing costs, but most people don’t understand what they are…or how they’re paid.    So what are closing costs then?  Closing costs have two separate parts really…1….the part associated with your loan, and 2…the part associated with the title company and changing the ownership of the home to you..

   One thing you need to know is that closing costs are not set…in other words…one persons closing costs will not be the same as another persons closing costs.  Why?  Because …1….every person has a different loan based on their credit scores, type of loan, amount of home buying, amount (if any) of downpayment, what day they’re closing (keys) on, interest rate, APR rate, lender they’re using (some have more fees than others), etc…  See how complicated that can get?

So what about the second part?  Well, that can differ as well based on the title company since not every title company charges exactly the same for their individual costs.  Then there is also the costs for the property taxes of the home, time of year you are buying based on when the taxes are due/have been paid, cost of your home owners insurance, amount of loan interest, and more.  Even more confusing, yes?      

Ok…now I know you are thinking that this weeks post is pointless then, but really, I have a point!  🙂  My point is that closing costs are variable based on you, your loan, your lender, your (soon to be) new home, and on the title company.  So how do you figure that out?  Well, really no one can figure out HOW much your closing costs are going to be until you have an accepted offer on a home…then we can figure out what your closing costs will be because you will have a home to base numbers off of, a loan chosen, a lender, and the title company picked out.  Most numbers in real estate are a guesstimate until you have all the pieces in place…all the ducks in order…so to speak.  

 When you are getting pre-approved, your lender will base all your numbers on a guesstimate…what we think your costs are going to be.  Most times lenders, etc will guess high so that the numbers will come in smaller and more affordable for you.  It is always better to look like a hero than a zero!  🙂  

I know, I know…still not very helpful is it?  I am sorry.  Closing costs are as individual as you are.  However, 98% of buyers will request the seller to pay for 2%-3% of their closing costs.  Where does that number come from though as even this number changes depending on the person, their loan, the home involved, etc.  
 Well, to start…  a FHA loan requires 3.5% downpayment.  FHA is the most common loan type for buyers as it is very forgiving, and easier for the majority of folks to get pre-approved for.  There are some loans, and yes, grants too, that can take care of that down payment for you….meaning a ZERO down loan for you, the buyer.  There are some additional fees to using these down payment assistance programs that is part of your closing costs.  There is also a zero down USDA loan that has other fees associated with it.  
 On average, the costs between title, loan, lender, taxes, interest, insurance, etc….run about 3% of the homes purchase price….rarely does it run more.    When listing a home, I (and many other agents) include at least some seller paid closing costs to the sales price of the home.  This is done because so many buyers request those from the seller, and this way it isn’t a surprise to the seller.  So, yes, some sellers will pay for your closing costs when buying a home…of course, that depends on if there are other offers involved.  In a multiple offer situation the seller may not pay any closing costs.  One thing you need to know though is that if you ask for 3% in closing costs, and the lender only needs 2%, you don’t get that other 1%….it goes back to the seller.  You can’t get cash back from buying a home….unless you are having your earnest money &/or appraisal fee returned to you…this happens if you are using a loan that covers your costs and fees.  Usually your appraisal is part of your closing costs (but paid for at time of appraisal), and your earnest money is applied toward your down payment, or your closing costs. 

Again, 85% of the time a buyer will request up to 2%-3% in closing costs to be paid for by the seller.  The other 15% of the time a buyer will pay their own closing costs so they don’t have to finance them.  If a buyer has their own down payment, the lender can also help pay closing costs, and this can be done a couple of different ways.  If a buyer is using one of the down payment assistance loans or grants, or the USDA loan, the lender can’t help pay those closing costs.  The buyer can use their earnest money towards these though.  Not asking a seller for help with closing costs does make for a ‘stronger’ offer, but let’s be honest…that isn’t always an option for a lot of people.  Asking the seller for help paying closing costs is quite common.

In short….buyers responsibility for closing costs are:
* Lender’s Title Insurance Policy
* Half of the escrow fee
* Home Inspection (paid for at time of inspection)
* Recording fees

* First year Homeowners Insurance Premium
* First year Flood Insurance (if applies)
* Pro-rated property taxes

* Appraisal fee (paid for when appraisal is ordered)
* Survey fee (if required)
* HOA fees (if applies)
* Pro-rated HOA fees (if applies)

* Lender fees;  appraisal fee (see above), credit report, loan origination fee, pre-paid interest, private mortgage insurance 

All of these fees can change depending on the title company, the lender you’ve hired, the home insurance company you are using, the home inspector you’ve hired, the appraisers and what they’re charging (and if you need a rush), etc…  
as always….I am available for questions…as is Chris Berg with Pinnacle Mortgage (cberg@pcmloan.com & 503-320-0925 cell)  

One last thing you need to remember is that a real estate agent is not a sales person.  It is not our job to ‘sell’ you anything.  We are assistants, advisers, guidance, and help.  You should not feel as if your agent is trying to sell you a home, or anything else, our job should be to help you in getting the home you want.  This being said remember that you do not get T-Bone steaks for the price of hamburger…Look ONLY at homes within your budget.  ALWAYS ask questions, and expect answers without a lot of lingo.  I was always told that if you can’t explain something in a way that the other person can understand clearly, it is because you don’t understand it yourself.  🙂

Information is power, and I hope that I am able to help you.  Good luck, and as always…May the odds be ever in your favor out there….  AND If you are looking for a real estate agent, I would love to be able to help you.  
 As always….this is just a quick overview…. again…and I can’t say this enough…please remember that your agent is NOT a salesperson, and should not be acting like one.  Real Estate is not really about houses, it is about relationships.  Your agent, and your lender work for YOU.  You drive the bus…we are merely GPS to help you get to your goals.  Like the classes, this weekly blog email is to help you with your home adventure.  The goal is to be informative and non-promotional.  🙂  We are, however, hoping you will call and want us to help with your adventure.

If you have any questions about this, or something you have heard…or if you would like me to help you with your home adventure, please call, email,  text, or facebook me anytime.  I am, as always, happy to help!

Thank you again for your business and your referrals!!  …and thank you for referring these classes to your friends, family, and co-workers.

.   ..disclaimer…if you have already purchased a home, or would no longer like to receive these emails, please let me know and I will be happy to remove you from any further mailings…

Upcoming Topics: What are the ‘Hidden’ Costs of Buying a Home? ….. 
What if I don’t have a Down Payment? …..  &….
What happens after an offer is made?
Open Houses & what you need to know before you go…
Last Week:  winter market, interest rates, & best time to buy?

Have a great day, and I will talk to you soon,

Tracie DeMars / Realtor

ReMax Equity Group
License# 81289
Vancouver, WA

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