First-Time Buyer ABC’s: What Are Closing Costs? by Raul Lozoya

Closing costs normally include inspections, title insurance, loan points, escrow costs, property taxes, and document fees. Both your Realtor and lender should provide an estimate of closing costs for you. Knowing the approximate costs upfront will help you plan your budget for purchasing your home.

Closing costs can be expensive. The loan will be the most expensive closing costs of all. It will most likely be between 55% and 65% of the overall closing costs. Closing costs can average between 2 to 4 percent of the total home purchase price. So if you are planning to buy a $250,000 home, be prepared to pay anywhere from 5,000 upwards to $10,000! A $400,000 home may be $8,000 to $16,000 in closing costs.

You may be discouraged at this point but don’t turn off your hopes on your dreams of buying your first home just yet. Remember this; in Real Estate everything is negotiable! A good experienced Realtor will point out key strategical areas to negotiate that will help you save thousands of dollars. Another way to save is to have good credit. The better your credit, the better loan products you may qualify for that will help you lower your closing costs and your monthly mortgage payments

Here are a few key ways to save:

* Negotiate with the seller. For example, you can offer a full price offer on the home with the condition that the seller pays all of your closing costs.

* Ask your Realtor to negotiate for you the inspection fees and document fees. They may hesitate in doing so because a Realtor usually works with one or two inspectors and one transaction coordinator. But press them on it. Their priority should be to get you the best deal in all aspects of the transaction. They may not be able to do it but at least they should try.

* Negotiate with the lender. Grab a no-fee loan. The fee is usually wrapped into a higher rate loan but it does offer one advantage – you get to save on the amount of cash you would need up-front.

* Shop for the best deal. Every lender has its own unique fee structure. Compare lenders as you would test drive different cars when you are shopping for a car.

* Work with your lender if you just don’t have enough money to pay for closing costs. You may qualify for a 103% loan which means that the closing costs are included along with the loan.

Any questions or to sign up for my free monthly newsletter, give me a call at (619) 245-5221 or just send me an e-mail at raullozoya@century21award.com.

About The Author

Raul Lozoya has been a licensed REALTOR working with Buyers and Sellers in San Diego, CA since 2004. Raul specializes in working with First-time buyers and has helped many first-time buyers buy their first home.