In addition to a down payment, most conventional first-time home loans come with closing costs. These fees can make budgeting to buy a house more difficult, so understanding what to expect ahead of time is important.
Here, the mortgage experts at Integrity First Lending explain what closing costs cover, how much yours may be and an option to avoid saving up for the expense.
What Are Mortgage Closing Costs?
Generally speaking, they’re costs charged at the closing of a real estate transaction. Most home buyers pay fees for:
- Property appraisal
- Home inspection
- Property title search
- Home loan application
- Mortgage underwriting
- Mortgage insurance application
- Lender’s title insurance
Mortgage lenders typically also require home buyers to prepay a portion of their property taxes. Plus, the annual homeowners insurance premium along with another two or three months’ worth of payments is usually due at closing.
How Much Are Mortgage Closing Costs?
In most cases, the costs at closing are between two and five percent of the mortgage loan total.
To put that into perspective, imagine you’re thinking about buying a house for $350,000. The total of your closing fees would likely be somewhere between $7,000 and $17,500.
Can the Home Seller Pay the Closing Costs?
If saving up enough money to pay the costs due at closing would mean putting off your dreams of becoming a homeowner, you might consider another option – structuring your offer to have the seller absorb the fees.
Here’s how that could work, using the above example. Let’s say you’ve agreed to the price of $350,000, and according the mortgage lender’s outline of closing expenses included with your first-time home loan estimate, your costs will amount to $10,000. Offer the seller $360,000, stipulating in the contract that the seller will use the extra to cover the fees at closing.
Should You Consider Financing Your Closing Costs?
If you can’t afford to pay the costs upfront, incorporating them into your first-time home loan could be a smart move. That way, you won’t have to delay your dreams of becoming a homeowner. And, if you plan to stay in your new home for just a handful of years, you might end up paying less overall if you finance the closing expenses than if you pay upfront.
Keep in mind, though, that you’ll likely end up with a less favorable interest rate and higher monthly mortgage payments. But later on, you can consider refinancing to improve your home loan terms.
Are you ready to buy your first house? For expert help navigating the mortgage process and answers to all of your questions about first-time home loans in Utah, turn to the experts at Integrity First Lending.
With decades of combined experience in the home loan and mortgage industry, the Integrity First Lending team has the skill to find a financing solution that meets your needs and fits your budget. For more information on closing costs or to explore your options for first-time home loans, contact us today.