Once You Purchase a Home - Details on Real Estate Closing Costs

When exercising your legal rights to purchase a home, it is important for you to be aware of the possible expenses that are often associated with real estate closing costs. Closing is usually considered the final step to purchase a home. At this stage, a price has been agreed upon, inspections and appraisals have been done, and, hopefully, any last minute arrangements or negotiations have been discussed and agreed to as well.

All transactions involving the purchase of a home are different, but, in every case, the seller and buyer agree on who will pay for the specific closing expenses. In this article, we are only going to discuss those expenses for which buyers are usually responsible and end up paying if not agreed to with the seller. Future articles will discuss the expenses that sellers must cover as well as how to make sure that these real estate closing costs are kept as low as possible.

The expenses that buyers must cover are inclusive of fees for services that are requested when one applies for a mortgage or for services that could ultimately protect the buyer should unexpected situations come up. Since every contract is negotiable, these expenses can be paid by either party (the seller or the buyer), but they usually are on the buyer's side of the fence.

In general, real estate closing costs can vary from 3 to 5 percent of the final price to purchase a home, but buyers should examine the costs from every lender closely, as some lenders may attempt to add in unnecessary fees or costs. The best way to look at the breakdown of the real estate closing costs is by reviewing the Good Faith Estimate that will be provided within three days of completion of the mortgage application once you begin the proceedings to purchase your home. The estimates from various lenders can then be compared to one another in order to find the best deal. It is also good to know that having different mortgage lenders pull your credit will not reduce your credit score as other forms of debt (credit cards, cars) can do. Generally, these kinds of credit requests (a.k.a. credit pulls) - taken out for the purchase of a home - are considered good debt by the credit agencies. This will help you in the process of finding the best lender with good options for real estate closing costs.

Keep in mind that the lower your interest rate, the higher your real estate closing costs are going to be due to the points that you are paying ahead of time. Points are interest paid up front in order to get an overall lower rate once you purchase a home. Bear in mind that it may be more beneficial to pay fewer points and get a higher interest rate in some instances, and it may be better to pay more points in trade for a lower rate in others. Talk to your mortgage lender for more information once you're ready to purchase a home. Depending on your situation, they should be able to explain which option will be best for you.

When you are dealing with real estate closing costs upon the purchase of a home, there are several issues that you need to be aware of:

Mortgage application fees: When you apply for a loan to purchase a home, most lenders will charge you a fee (which will not be refunded, even if you are denied the loan or you choose not to accept the loan). This fee may be applied to your final real estate closing costs or may be paid up front. Ask the individual lender what his procedure is.

Points: As stated above, points are pre-paid interest that can result in a lower overall interest rate. There are calculators online as well as those provided by various lenders that can help you figure out how best to use points to your advantage upon the purchase of a home.

Appraisal Fees: In order to determine the market value of a house, an appraisal by an independent inspector must be performed. It is usually the buyer's responsibility to pay the appraisal fees for this to happen. Bear in mind that the buyer can request a copy of the appraisal from the lender once it is completed.

Inspection fees: Inspection fees are also usually required to be paid by the buyer as part of the real estate closing costs. This ensures that the home is inspected to make sure it is in good condition and to note any issues that may be discovered. Some lenders will cover this fee, so ask before you sign any contracts.