Closing Costs: No Surprises

handshake on closing costs
handshake on closing costs

Many homebuyers mistakenly arrive at closing unprepared for a laundry list of closing costs: major and minor fees that are a routine part of any home purchase. This can be because the lender increased fees on lender-controlled aspects of a transaction, or because a buyer chose a third party (appraiser, inspector, attorney, title company) that might charge higher prices than those estimated by the lender.

Fortunately, new rules and regulations provide more clarity on the closing costs that borrowers can expect to pay. As a rule of thumb, homebuyers can expect to pay closing costs equivalent to 3 percent to 5 percent of their loan amount, says Guy Cecala, publisher of Inside Mortgage Finance, a Bethesda, Md.-based mortgage research firm. This is money that the homebuyers will spend in addition to their down payment, and those stretching to buy should know that they'll need to cover these closing costs in addition to the savings reserves that some lenders require. (In other words, raiding your savings on closing day to pay unforeseen closing costs may not work out!)

So how can you avoid surprises with closing costs? There are several steps you can take:



Terms and closing costs