Closing Costs -- and the always talked about 3%. What does that mean?
In addition to the money you are putting down on your loan (could be 3%, 5%, 20% or more depending on the type of loan you and your loan officer have selected to make the most sense for your purchase) you will have closing costs. Depending on the current state of the market, sellers may contribute to the buyers closing costs - but as a buyer you should be prepared to pay for these.
A great estimate for factoring what your closing costs will be is to take the purchase price and multiply that by 3%.
Within the 3% there are mortgage origination fees which include your lock in fees and overall fees to the lender. Some lenders charge their clients for the appraisal up front, others wrap it into the overall fee paid at closing so a good thing to ask ahead of time so you are prepared for what your expenses will look like throughout the transaction. You will get a breakdown of all of these fees from you lender when you get pre-approved (estimates) and again when you submit an offer, they will provide you with a truth in lending statement for that specific property.
There are title and closing fees that both buyers and sellers pay. Seller's closing costs on average are much less than buyers. Buyers side pays more as there are fees the title company incurs to process the sale like pulling property information, title search and examination, and you may want to get title insurance - there are taxes and filing fees on the local and state level that are paid for within these "closing costs". It is VERY unlikely and uncommon that a buyer would pay for the sellers closing costs, however, given that state of the market and the properties price point, at times it is common for the seller to pay for the buyers closing costs.
Overall it’s best to figure that closing fees are going to be about 3%, as your real estate advisor Roost will be able to help you determine the best strategy for the offer you want to present to the seller. Maybe the seller will pay for the buyer's closing costs but those fees will be added on top of the purchase price, or maybe the buyer and seller will split the cost to reduce the amount of cash out of pocket the buyer needs to bring to closing. When the market has shifted into a seller's market, it is less likely the seller will contribute to the closing costs, and in that kind of market if the property has multiple offers the winning buyer will probably pay their own closings costs. This is why we advise buyers to be prepared to spend 3% in closing costs when house shopping.
Breakdown of Expected Costs
$250,000 Property @ 3% = Closing Costs $7,500
$400,000 Property @ 3% = Closing Costs $12,000
$650,000 Property @ 3% = Closing Costs $19,500