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Closing Costs

💰 The Homebuyer’s Comprehensive Guide to Closing Costs

 

What Are Closing Costs?

Closing costs are additional expenses, separate from your down payment, that you pay to finalize your home purchase. These costs typically range from 2% to 4% of your loan amount and cover various services and fees required to complete the transaction.

The Closing Costs Equation

Closing Costs + Down Payment - Initial Deposit = Amount You Bring To Closing 

🏷️ Breaking Down Closing Costs

 

1. Lender Fees 🏦

  • Processing and underwriting charges
  • Application fee
  • Credit check fee

2. Upfront Expenses 🕰️

  • Appraisal*
  • Inspections* (home, pest, radon, roof, pool, survey, etc.)
    *These fees are non-refundable and paid at the time of service.

3. Title Company Charges 📜

  • Title search fee
  • Attorney Doc prep/Closing fee
  • Title insurance
    • In Davidson County, sellers often cover this fee for resale properties (but it’s negotiable)
    • Buyers usually cover this for new construction or bank-owned foreclosures
    • Consider offering to cover this in competitive situations
      Tip: We love to close with Rudy Title. They have a title insurance calculator on their website.

4. Escrow Account Setup 💼

  • Property taxes (prorated for your ownership period)
  • Homeowners insurance (first year’s premium)
  • Reserve cushion (typically several months of taxes and insurance)
    How it works: Your lender divides annual property tax and insurance by 12, adding it to your monthly mortgage payment. They then pay these bills from your escrow account when due.

5. Government Charges 🏛️

  • State transaction tax (Stamp tax)
  • Register of Deeds filing fees

6. Other Possible Fees 🔍

  • Flood certification
  • HOA setup and reserve cushion
  • Home warranty (if purchased by buyer)
  • Courier/mailing fees
  • Power of Attorney assignment
  • Mortgage insurance (for down payments less than 20%)
    • May include upfront costs for FHA, THDA, or RDA loans
    • VA loans have a funding fee (can be rolled into the loan or paid at closing)

💡 Additional Considerations

 

Points 🔵

  • Optional way to “buy down” your interest rate
  • 1 point costs 1% of loan amount, typically reduces rate by 1/8th to 1/4th

Seller-Paid Closing Costs 🎁

  • Can be negotiated but is subject to loan program limits
  • Reduces the amount you need to bring to closing

Lender-Paid Closing Costs 🌀

  • Some costs can be rolled into your loan ↑
  • Results in a higher interest rate for the life of the loan ↓

Earnest Money Deposit 💸

  • Typically 1-2% of purchase price due upon accepted contract
  • Applied towards your closing costs (not an additional fee)
  • Refundable if you withdraw due to written contingencies (e.g., inspection, appraisal, financing)
  • At risk if you breach the contract

 

🆕 2024 Update: Buyer Agent Compensation

Starting August 2024, listing agents can no longer advertise seller-paid compensation to buyer’s agents. This will become a negotiation point in your offer. Read more about buyer agent commissions. 

Need more information? We recommend:

🎗️Remember, understanding these costs is crucial for budgeting your home purchase. Don’t hesitate to ask us or your lender for clarification!