Buying a home and completing the transaction process of a real estate deal comes with a number of costs. Some of these are borne by the seller, but the majority of them have to be paid by the buyer. Therefore, if you are going into a deal or simply making up your mind about buying your new house, California Over 55+ can give you the right idea about the total costs involved so that you can adjust your budget accordingly.
Apart from down payment on your purchase, a buyer also has to pay principal and interest on his own along with closing costs to be paid at the time the deal closes. Typically, the closing costs range between 2% and 5% of the total purchase price. For example, you will have to pay between $6,000 and $14,000 for a home that costs $300,000. As per a survey conducted recently, an average buyer pays approximately $3,700 in closing costs.
When a buyer is using a mortgage company to finance the purchase, the lender will issue a Good Faith Estimate (GFE) of the closing costs within 3 days of applying for the loan. Even though this will only be an estimate – since a lot of fees can change by up to 10% – it gives you a general idea of how much you stand to pay in closing costs.
The lender also issues an HUD-1 settlement statement within 1 day of closing. The HUD-1 statement outlines the final closing costs you are required to pay. It should be noted that many of the fees outlined in the HUD-1 are negotiable, and your agent can help you bring them down or downright get rid of them, helping you save on closing costs.
What is a Good Faith Estimate
The GFE includes all the estimated fees on your loan and closing costs associated with your purchase. These are listed below:
- Origination charges and points
- State and local transfer taxes
- Credit Report Fee
- Hazard Insurance
- Appraisal fees
- Title insurance premiums
- Initial Escrow balances for property taxes and insurance
- Government charges to record the loan
Some of these costs are fixed and non-negotiable. They have to be paid according to the law in the state or county. These include origination charges, points and all government transfer charges. Apart from these, other fees have room for change but only up to a maximum of 10%. All in all, a GFE will give you a pretty accurate idea of what to expect when the deal closes.
Costs to Consider When Purchasing a Home
Apart from closing costs and loan fees, a buyer must also have his down payment ready to close the deal timely. Down payments are usually 3.5% to 5% of the purchase price. Lenders usually require two mortgage payments to be made before closing but it is best to have payments of up to 6 months at your disposal. California55Plus Real Estate can give you the right information and assist you through the purchase and sell of you home.