What are Closing Costs & How Much Are They in Austin, TX?
For many first-time home buyers, the process of purchasing a new home can be full of surprises. That is because buying a home is not as simple as finding a piece of property that you like and making a purchase. There are many more factors that should always be taken into consideration while planning to buy a new home, such as the location, how much home you can afford, and closing costs.
Many home buyers underestimate the cost of closing a real estate transaction and don’t factor it into their budget. Below, we’ve compiled a short guide to closing costs and what you should expect from them:
What Are Closing Costs?
Closing costs are the fees that are charged by lenders and other individuals that are all related to your home purchase. There are many home buyers who are often surprised by these so-called unexpected charges that they must pay before closing their home purchase. Along with the down payment on the home, buyers will typically have to pay additional fees to the lender or other individuals such as a home inspector, attorney, or home appraiser. The closing costs are usually paid by the buyer instead of the seller. However, this aspect can vary from one sale to another.
What Charges go into your Total Closing Costs?
The fees that go into your closing costs will vary as no two home sales are the same. Closing costs can include fees for credit report processing, loan origination fees, attorney’s fees, home inspection charges, appraisal fees, survey fees, and title search fees (just to name a few). Ultimately, the types of charges that go into your total closing costs will depend on where you live, and the property that you purchase.
How Much Will You Pay in Closing Costs?
The average amount that a buyer must pay in closing costs is usually between two to five percent of the purchase price. That comes to paying $3,000 to $7,500 in closing costs for a home that cost $150,000. The general estimate that most American buyers are paying according to recent reports is around $3,700 in closing costs.
Lenders are required to provide all home buyers with a good faith estimate within three days of applying for a loan. This lets the buyer have a good idea of how much their closing costs will be. All buyers should keep in mind that this is just an estimate, and many of the fees included in the GFE can rise up to ten percent, which could greatly increase your final amount due. Before the sale closes, your lender will provide you with an HUD-1 settlement statement that lists each fee included in your closing costs. If you do not understand what a specific fee is, your lender will be able to explain the charge to you.
How Can Home Buyers Avoid Closing Costs?
It is possible to avoid paying upfront closing costs by applying for a no-closing cost mortgage. Alternatively, you can also negotiate with the seller so that they will pay some of the closing costs for you. There are times when a seller agrees to pay half or a certain amount of closing costs if it means that the sale will close faster.
Understanding Closing Costs in Austin, TX
Closing costs may come as a surprise to many first-time buyers, but they are necessary fees that must be paid in order for the sale of a home to close. Learning more about what closing costs are will help you to prepare your budget for the final price you have to pay. Now that you understand more about these fees and how much buyers are generally expected to pay, you can begin your search for a new home in the Austin area.