It is amazing that in a year with extremely low mortgage rates reported all around the country, closing costs are up by as much as 6% from the previous year. Part of the reason for this reality is that stricter regulations on loans have increased the costs to banks, and they always find a way to pass on new costs to the consumer.
Understanding Third-Party Closing Costs
When closing on a mortgage you, the borrower, will notice a long list of additional fees you will pay at closing. These can range from hundreds to thousands of dollars depending on the state and the specific deal. When looking at these fees you will notice that some are third-party fees.
This is not out of the ordinary and you are not being taken advantage of on these fees. These costs are for services rendered by outside companies at the request of the mortgage lender to make sure everything is in order with the property.
Closing Costs You Can Expect To Pay
Anyone going through the mortgage process for the first time should expect to see several odd sounding terms on the bill. The first is ‘origination’ or ‘processing’ which is the primary fee the lender charges for creating the mortgage.
Other fees that might appear are discount points, flood certification, title insurance, credit reports, and appraisals. These are all necessary when buying a home and should be expected to appear in closing costs.
The Trick behind Zero-Closing Cost Mortgages
With closing fees adding up it may seem like a good idea to opt for a mortgage that has absolutely no closing costs if it is offered. While no money will be required up front, it can add up over the long run.
This is because the lender is agreeing to pay all the closing costs for you in exchange for a slightly higher interest rate, which will pay off for the lender over the course of the mortgage.
The amount you can expect to pay really depends on the cost of living and real estate market where you are buying a home. A mortgage specialist will be able to talk to you in advance of applying for your mortgage to give you a better idea of what you are looking at paying for closing costs.
Let the Trusted Advisors | REALTORS® from Martin Real Estate Advisors, a JP & Associates Realtors® Company, put you in contact with several of our lender partners today for more information on what closing costs you should expect to pay, and why, and how much you should be budgeting for in your specific home buying scenario.
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