What to Know About Closing Costs & Closing Fees

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So you’ve saved your down payment, picked the perfect home and you have a closing date.  You’ve probably received a statement from your lender in advance outlining the closing costs and fees you’ll need to bring along with you to the closing. 

Many times buyers have no idea what is included in this expense – seemingly the second largest chunk of change they need to fork over, next to the down payment.  To help clarify what all is entailed in the fees charged by your lender and paid toward the purchase of your home we spoke to an industry professional to get the details.

What Fees Are Included in Closing Costs?

Mainly lenders charge underwriting fees and processing – which together are considered “lending fees”.  In addition to those charges there are a few more routine but necessary steps adding to the closing costs.  These include the cost of having an appraisal done on the new home, pulling a credit report on the borrower, obtaining a flood certification as well as closing title fees on the closing date.  Additionally, prepaid interest and post-paid property tax are also items we see incorporated in closing costs.

Do These Fees Vary From Lender To Lender?

This is one of the main areas, in addition to minor fluctuations in current interest rates that lenders compete with each other for new loans.  We caution against paying any origination fees and discount points, which add to a percentage of your loan amount.  Each lender will charge varying underwriting processing fees but appraisals usually cost within the typical range of $325 and up.

How Much Can a Seller Contribute to Closing Costs?

The maximum amount a seller can pay in closing costs is about 6% and with the market being controlled largely by buyers, many sellers offer concessions in the way of paying all or a portion of closing costs.  In fact, savvy buyers know this going in to the deal and put this condition as part of their offer. Saving as much as several thousand dollars or more, this is a huge plus-point for buyers in today’s market and one that is regularly being utilized.  Since closing costs can be incorporated into the loan this can also affect the interest rate buyers end up getting by a nominal amount.

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It is a good idea to check with your lender or potential lenders if you are still shopping around to find out exactly what is included in their closing costs.  Be sure to consult with your Realtor to compare the numbers and confirm whether you are getting the best deal.  Also, it might be more beneficial to work with lenders in your Realtor’s preferred network of vendors. 

Understanding the Difference Between Online Resources and a Realtor

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The Internet can be a great resource for a host of things centered on buying or selling your home but in some cases, the most you can expect to gain is a basic understanding of things.  For something as serious and important as pricing your home to either value it or sell it, relying on the Internet can only go so far.  Here we’ve outlined some key differences between the figures you will yield from online sources versus those that have been compiled by your local Realtor.


ACCURACY IS VITAL
In today’s market especially, accurately pricing your home to sell is essential.  With it being a buyers’ market, you will have to gain a solid understanding of all factors that contribute toward your property’s value.  There can be negative repercussions of pricing a home either too low or too high.  One such scenario is if there was a seasoned buyer who had taken the time to research in advance of searching for homes.  That buyer’s knowing what to expect in the local market seeing your overpriced home could result in a turn-off and you could lose the sale.  By the same token, you stand to get the shorter end of the stick in case of not knowing what you could have charged.  Spending a little more time and/or expense can make a huge difference in the end outcome. 


ONLINE TOOLS AND CALCULATORS
There are more than several websites where anyone can log on, put in their zip code and be given an instant “analysis” of their real estate value. The figures that appear as results from searches made through online resources stem from a conglomeration of several weeks and sometimes months of data collected from a particular region. 

Websites such as www.zillow.com, www.realtytrac.com or www.trulia.com offer a great way to get a generic idea of the value that homes in your region are going for or have gone for recently.  As an added resource to other services also offered on these sites, the goal is not to assist homeowners in assigning a selling price on their property based on the data, rather to offer a snapshot on sales and pricing data for the area.  In fact, for many people it is the perfect tool to add an extra edge when determining the fair market value of your home, along with other factors. 


PROFESSIONAL COMPARABLE MARKET ANALYSIS
While online real estate tools are a great way to get a preliminary idea, they are only going to yield a figure that will show you where to start.  To get an accurate assessment, you will need to avail the professional services of a Realtor.  The only way to get an accurate “reading” of what the market rates are for homes in your vicinity and your neighborhood in particular, is to have a comparative market analysis conducted by a Realtor who understands your neighborhood.  There is a good chance that they have dealt with properties in the area on a first-hand basis, regularly interact with the agencies and organizations that deal with very homes in your neighborhood and are familiar with the people in various facets that you will end up needing to interact with yourself, as the seller of your home.

Realtors conduct a detailed Comparable Market Analysis (sometimes also called Competitive Market Analysis) through a series of data compilation of area homes and properties, considering factors such as amount of land, the square footage and number of bedrooms or typical amenities in the neighborhood.  But homeowners can also opt to delve into accurate detail about their property’s value by relying on an independent appraiser.  Also, through the use of CMA data the County Tax Assessor determines the value of your property taxes. 

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When you are pricing your home to sell, it is vital that you use all available resources.  At first, it makes sense to “shop around” and get to know the generalities before you head for the specifics.  And as with most transactions dealing with your real estate world, it is always best to rely on your Realtor for quality, effective and accurate information that is relevant to you and YOUR market.