Closing Costs

Closing, or settlement, costs are expenses over and above the price of the property. Both the buyer and seller incur some of these expenses when transferring ownership of a property. Who actually pays, however, often depends on local custom and what the buyer or seller negotiates. Closing costs normally include title insurance, loan points, escrow or closing day charges, property taxes, and document fees. The lender provides an estimate of closing costs for prospective homebuyers.

Ways to save on closing costs, which can average between 2-3% of the total home purchase price:
  • Haggle with the seller. He may pay all or part of the closing costs.
  • Nab a no-point loan. You may have to pay a higher interest rate, but if you are strapped for cash and can qualify for a higher interest rate, you may find this type of loan can significantly reduce your closing costs.
  • Grab a no-fee loan. Although the fee is usually wrapped into a higher rate loan, it does offer one advantage – you get to save on the amount of cash you would need up-front.
  • Secure seller financing. These loans typically avoid the traditional fees or charges imposed by lenders.
  • Shop ‘til you drop for the best deal. Every lender has its own unique fee structure; you are bound to find one that works for you.
How to get closing day on track:
  • Keep extra money in your account. Something unexpected can pop up during the closing that will require more money out of your pocket. Take your checkbook. Even better, find out how much you will need to pay and write a certified check for the total amount.
  • Take your loan commitment letter. Use it to verify loan approval in case of a mistake or misunderstanding with the lender.
  • Take your contract to purchase. Pull it out if something a little suspicious comes up.
  • Take your personal ID. A driver’s license or other personal identification will do.
  • Do a before-closing inspection. It is always a good idea, when possible, to walk through the property to make a list of any problems.
  • Utilities. Arrange in advance to have the water and electric meters read on closing day and the service switched to your name to prevent interrupted service. The same applies for the fuel tank.