Q: I have been saving up to buy a one-bedroom condo, with the target date for purchase between summer of 2017 and 2018. I plan on having a 20 percent down payment, and have set aside money for insurance, HOA dues and other expenses. As a life-long renter who grew up in apartments, I don’t have a clear grip on is closing costs. What are they and how much money will I need to cover them?
Q: I inherited my grandparents’ winter home and have lived here through undergrad, but my new job is taking me out of state for what might be a long time. I don’t think I could be an absentee landlord, so I’m looking at selling. The thing is that I don’t really know what to budget for closing costs. What are my payables as the seller?
A: Closing costs are a pretty significant expense encapsulated by a somewhat vague term. There are two different sets of closing costs, one for the buyer and one for the seller. It’s the time when all costs related to the transfer of title are settled. Both parties pay their broker’s commissions, but there are a lot of other fees attached to the closing as well. The seller has to pay off previous mortgages and liens, plus a share of property taxes for the time they lived in and had possession of the residence. The buyer has to prepay their share of property taxes, HOA fees, lender’s fees, and expenses associated with the title search and documentation.
As a buyer may have noticed that some lenders offer no-closing cost mortgages, and while this can take some hassle out of the closing process for buyers, it can also be a little like signing away your right to negotiate. While some mortgage companies will waive their fees, this doesn’t happen too often. They might waive them in return for a higher interest rate, but that’s going to cost you in the long run. Isn’t it better to know what you’re paying for – and to whom? Both buyers and sellers – especially first timers – can be hit with fees that are padded, or even outright pocket-picking. For buyers, your lender should supply you with a loan estimate that tells you about fees, closing costs, payments and penalties.
If you’re wondering how to get a real-time idea of closing costs, we supply a handy calculator that can help you both figure out what you’ll need to set aside to cover those expenses. You do need some information to get started, but you’ll get a detailed list of expenses, what they are, and an understanding of how your money will be allocated. We want our clients to have a transparent closing from start to finish, and see how the process works. Your brokers are probably familiar with us, and can tell you exactly how we do business. Feel free to read around the blog, we have a lot of articles that are informative for buyers and sellers.